How hard is it to just cancel? If you have found yourself pondering this question in a heat of frustration after seeing unexpected charges on your card following your latest subscription service or free trial period, you’re not alone. The FTC hears you and is taking action. So, retailers and sellers, heed to the consumers’ cry for help and latest FTC proposal.

On March 23, 2023, the Federal Trade Commission (FTC) proposed a “click to cancel” rule requiring sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. This principle echoes a position the FTC raised in its staff report published last year, Bringing Dark Patterns to Light, in which the FTC stated, “negative option sellers should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to buy the product or sign up for the service.” In the report, the FTC explained “[t]his means that consumers should be able to cancel their subscription through the same medium (such as a website or mobile application) that the consumer used to sign up for the negative option plan in the first place” and that “sellers should not subject consumers to new offers or similar attempts to save the account that impose unreasonable delays on consumers’ cancellation efforts.” The FTC seeks to bring that guidance to more permanence in its latest rule proposal.

The notice of proposed rulemaking is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which the FTC relies on to tackle unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs. The proposed rule follows the FTC’s Advance Notice of Proposed Rulemaking from October 2, 2019, and Enforcement Policy Statement Regarding Negative Option Marketing issued on November 4, 2021. The FTC now seeks to amend the existing Negative Option Rule to establish new requirements to provide important information to consumers, obtain consumers’ express informed consent, and ensure consumers can easily cancel these programs when they choose.

As a reminder, negative option marketing refers to the practice of using a customers’ inaction or silence as acceptance of an offer. There are a variety of forms of negative option offers, including:

  • Prenotification plans: sellers provide notice of a forthcoming goods or services, and will ship and bill the customer for it unless the consumer rejects the merchandise within a prescribed time
  • Continuity plans: consumers agree in advance to receive periodic shipments of goods or services until they cancel the agreement
  • Automatic renewals: sellers unilaterally renew consumers’ subscriptions when they expire unless the consumer affirmatively cancels
  • Trial period: consumers receive a free product or service, after which sellers automatically begin charging the consumer for the same product or service unless the consumer cancels before the trial period ends

Each of these programs rely on consumers to do nothing, all while the seller can continue to collect payment. Of course, it is important to note that there are a number of well-intentioned negative option offers from book clubs, to wardrobe enhancers, to the endless options of streaming services. The existing regulatory framework, however, is inadequate in preventing abusive practices related to negative option plans; hence, the FTC’s proposed rule. The FTC’s current Negative Option Rule applies to prenotification plans only, under which sellers must meet certain disclosure requirements. The proposed rule is set to tackle the additional negative option marketing methods that have emerged and complement the existing regulatory framework. 

Outside the Negative Option Rule, additional laws apply to negative option marketing. First and foremost, Section 5(a) of the FTC Act prohibits unfair or deceptive practices.  Through guidance and enforcement matters, the FTC has established distinct requirements for negative option marketing including: disclosures must contain material terms, be clear and conspicuous, and provided before consumers make a purchase, as well as the requirements that a consumer must provide consent to such offers and marketers cannot impede cancellation. Next, the Restore Online Shoppers’ Confidence Act (ROSCA) prohibits charging or attempt to charge consumers to goods or services through any negative option feature, providing general provisions related to disclosures, consent, and cancellation. Additionally, the Telemarketing Sales Rule prohibits deceptive telemarketing acts or practices, extending to negative option offers but those made over the telephone only. The Electronic Fund Transfer Act (EFTA) also contains select provisions relevant to negative option marketing, prohibiting recurring charges on cards or account without written authorization. Last, the Unordered Merchandise Statute provides that unordered merchandise or a bill for such merchandize is an unfair method of competition and trade practice.

Against this regulatory backdrop, the proposed rule seeks to fill the gaps on negative option marketing compliance and namely, cover the types of plans that have developed but the existing laws cannot effectively reach. Under the proposed rule, companies will be required to make material clear and conspicuous disclosures about the product and service before obtaining any billing information from the consumer and such disclosure must appear immediately adjacent to the means of recording the consumer’s consent for the negative option feature if the disclosure is related to that feature. Sellers will also be required to separately obtain express, informed consent from consumers to enroll in any negative option program—it cannot be built into another part of the transaction. Another key aspect of the rule, is the requirement for, alas, “simple cancellation.” Such mechanism “must be at least as easy to use as the method the consumer used to initiate the Negative Option Feature.” To recap the proposed changes, the FTC has issued a handy fact sheet summary.

The public has 60 days to comment on the proposed rule. Provided the FTC’s concerted effort to curb abusive practices of negative option marketing and heightened enforcement activity on dark patterns related to negative option offers, we can expect that serious revisions to sellers’ terms and conditions and modifications to purchase processes will be unavoidable in the near future to obtain compliance.