FTC to Increase Enforcement on Subscription Services
Earlier today, the FTC issued a policy statement warning marketers against using “dark patterns” to trick or trap consumers into subscription services. The statement is primarily intended to assist marketers by providing guidance on the FTC’s interpretation of existing law as it applies to various types of “negative option” programs, including automatic renewals, subscriptions, and free-to-pay trials.
As we’ve noted in prior posts, the FTC has brought other enforcement actions in this area. The statement starts by outlining the FTC’s statutory authority behind those actions – including Section 5 of the FTC Act, the Restore Online Shoppers’ Confidence Act, and the Telemarketing Sales Rule – and highlights three key areas marketers should keep in mind: (1) Disclosure; (2) Consent; and (3) Cancellation.
- Disclosure: Marketers should clearly and conspicuously disclose the material terms of an offer, including the initial and ongoing costs, the deadline by which consumers must cancel to avoid future charges, and cancel information. The disclosures should be easy to notice and understand. The statement provides various tips for compliance. For example, disclosures should generally appear adjacent to the consent mechanism, and consumers should not be required to click on (or hover over) anything to see the disclosures.
- Consent: Marketers should obtain affirmative informed consent before charging consumers for a product or service. Among other things, the FTC states that marketers should obtain a “consumer’s acceptance of the negative option feature offer separately from any other portion of the entire transaction.” Although there may different ways to get affirmative consent, a footnote in the statement warns that a pre-checked box “does not constitute affirmative consent.”
- Cancellation: Marketers should provide an easy mechanism that allows consumers to cancel through the same method they signed up. For example, if consumers can sign up online, consumers should also be able to cancel online. When consumers attempt to cancel, marketers should not attempt to “save” them, subject them to new offers, or impose unreasonable barriers or delays.
If you offer a negative option program, you should take a close look at your practices – and whether you are getting complaints about those practices – before the FTC does. As the press release notes, the FTC is “ramping up its enforcement in response to a rising number of complaints about the financial harms caused by deceptive sign up tactics, including unauthorized charges or ongoing billing that is impossible cancel.”