The Federal Trade Commission (FTC), state attorneys general, and class action plaintiffs continue to scrutinize negative options and continuance offers. Negative option marketing includes advance notice negative option plans, renewal programs, automatic renewals, and free-to-paid (or discounted-price to paid) conversions.
The key to success in avoiding investigation and liability is as simple as making clear and complete disclosures (prominent, clearly explained, and posted where they will be read and where consumers' attention is focused). Obtaining consumers' clear, informed, and affirmative consent to negative option offers. Provides an easy cancellation mechanism. Send post-order confirmation and update reminders. We guarantee that refunds and cancellations will be processed in accordance with our disclosed policies.
Marketers selling products or services on a negative option or continuity basis should consider the following important questions:
- Are the important terms of the offer clearly disclosed, such as availability, price, frequency of charges, cancellation methods, and cancellation deadlines?
- Are the disclosures clear and noticeable, especially on mobile devices?
- Are disclosures made before a consumer agrees to purchase and register?
- Did the consumer demonstrate in a meaningful way that they understood and willingly consented to the negative option offer, not just the trial offer?
- Do you send post-transaction confirmations?
- If applicable to your offer, do you comply with laws requiring notice and separate consent for trials or free-to-paid transitions?
- Is there a convenient and effective way to cancel without imposing excessive retention efforts on customers?
- Do you offer a web-based cancellation mechanism for customers who register online?
- Does the company adhere to a cancellation and refund policy?
- Does your company send renewal notifications to customers who subscribe to annual memberships?
- Do your customer service representatives provide clear and conspicuous disclosures, obtain affirmative acceptance of offers, and follow procedures for adhering to the company's cancellation and refund policies?
- The company receives complaints from consumers, the BBB, or state AGs that consumers do not understand they are enrolling in the program, do not understand the amount or frequency of recurring charges, or have difficulty canceling. Are you getting complaints that you are doing this? If so, you need to reevaluate your habits.
We spotlight some chapters of Venable's popular works advertising law toolkithelps marketing teams address legal risks for their organizations. click here To download the entire tool kitAccording to Advertising Law Toolkit Show Listen to the podcast to hear the author of this chapter dig deeper into the issue of negative options and continuity marketing in this week's episode.
