ICYMI: State AGs Support FTC’s Amendments on Auto-Renewals – but Have Suggestions
On June 23, 2023, a bipartisan coalition of 26 state attorneys general (AGs) submitted comments in support of the FTC’s amendments to the Negative Option Rule (Rule). Though the AGs assert that the FTC’s requirements under the proposed Negative Option Rule are already generally required by existing state and federal law, the AGs agreed that additional guidance and specificity on compliance with negative option rules would benefit consumers.
The AGs note consumer experiences and harms after a group of AGs filed a comment to a 2019 ANPR. Examples include consumers accepting a gift but then being charged full price for the offer without knowledge; consumers having difficulty cancelling magazine subscriptions; and consumers attempting to cancel a subscription through chat features on a company website but being given roadblocks throughout the process.
The letter outlines the current enforcement landscape for different negative option marketing schemes including a partial list of resolved state settlements with companies.
Here are some highlights of the AG positions on the Rule:
- Autorenewal issues could signal potential deceptive representations about the underlying product or other parts of the transaction.
- AGs agree the rule should also require marketers to present material terms “clearly and conspicuously” and immediately adjacent to the consent. They propose amendments requiring the disclosure of “all material policies concerning cancellation” and “all the information necessary for the consumer to effectively cancel” citing concerns with cancellation issues with click to cancel features that lead to “confusing cancellation flows.” The AGs also suggest that material information should be capable of being retained by the consumer.
- AGs propose an additional consent before charging a customer after the completion of a free trial, suggesting it is not overly burdensome and would benefit consumers.
- AGs agree with the Rule’s proposal that a cancellation mechanism must be “at least as simple as” the method the consumer used to sign up for the negative option feature. For example, if the consumer signed up online, then the consumer should be able to cancel online. The AGs reference “voluminous complaints” about consumers unsuccessfully cancelling. They also propose adoption of a New York statute’s language that a simple cancellation mechanism must be “cost effective, timely, and easy to use,” discussing that being understaffed should not be an excuse for a lengthy cancellation. In addition, the AGs propose a new category of cancellation by chat or text message. Finally, they suggest an amendment that consumers should be able to cancel through any medium the seller uses, and not be limited to what they signed up with.
- These AGs agree that sellers should obtain affirmative consent prior to a “save” attempt with a consumer. (Note the AGs limited save attempts in resolving their recent Adore Me settlement.) The AGs also add that the Rule should clarify that save attempts for subscribers should not be presented in a manner that is more prominent than the option to decline, referring to that as a potential dark pattern.
- Consumers should receive reminders, “at least annually, identifying the product or service, the frequency and amount of charges, and the means to cancel.” Particularly if the seller provides non-physical products and services, the AGs strongly endorse the requirement for regular reminders for these subscriptions. The AGs further suggest the reminders should be provided not only through the same medium that the consumer used to consent, but also through any other medium used to communicate with the consumer and include all material information required in other portions of the Rule.
- The FTC’s proposed Rule should not infringe on state authority to regulate negative option marketing in their own jurisdictions.
It’s important to note that the AGs consider clear disclosures and simple cancellation mechanisms to be required under the current federal and state requirements, including state specific autorenewal laws and more general UDAP statutes. However, as these comments suggest, states’ interpretations of current requirements and proposals for new ones show they sometimes go beyond what the FTC has proposed. On the heels of the multistate Adore Me settlement and given continued state comments and interest on this topic, it is clear the states will continue to pursue auto renewal actions. We will continue monitoring updates to the Rule as well as the general autorenewal enforcement landscape.