October 22, 2014
The Restore Online Shoppers’ Confidence Act (“ROSCA”) was enacted in January 2011 to prohibit online retailers from charging consumers’ financial accounts unless they have clearly disclosed all material terms associated with their subject products or services and obtained consumers’ express informed consent to bill for those products or services. ROSCA mandates that sellers obtain financial account information directly from consumers and not share that information with other third party sellers (for example, the sharing of consumer financial information between sellers in an online co-registration flow). A third party seller is defined by ROSCA as a vendor that offers a good or service to a consumer after the consumer has completed a transaction with a different Internet merchant. Third party sellers are required to create a process for the consumer to re-enter personal and financial information before any transaction with them can be completed. This information may not be obtained from the initial transaction merchant. In addition, ROSCA requires that online sellers provide consumers with a simple and effective way to opt out of future recurring charges.
Any violation of ROSCA will be considered an unfair or deceptive act and practice under the Federal Trade Commission (“FTC”) Act. ROSCA fines can reach $10,000 per violation, not including any potential FTC civil action. States also have the right to enforce and prosecute any violation of the law that takes place within its borders.
Despite the foregoing, the FTC has not actively enforced the provisions of ROSCA . . . until now.
FTC ROSCA Case
Similar to other recent cases brought by the FTC for violations of the FTC Act, the FTC recently sought and was granted a preliminary injunction against online sellers and marketers of the health and dietary supplement product “Simple Pure,” in violation of ROSCA. Specifically, the sellers of Simple Pure were offering consumers “free” trial offers of Simple Pure and marketing the product’s health and dietary benefits through Internet, print, radio and television advertisements, without the requisite clinical studies to support their claims.
Jessica Rich, Director of the FTC’s Bureau of Consumer Protection, stated that the sellers of Simple Pure “not only deceived consumers about the effectiveness of their products, but also repeatedly debited consumers’ accounts without their approval.” According to the FTC’s complaint, sellers and marketers of Simple Pure violated ROSCA by not properly obtaining consumers’ consent to charge their financial accounts on a recurring basis. Moreover, the FTC alleged that Simple Pure did not offer consumers a simple way to discontinue the automatic charges or inform consumers about their refund and cancellation policies.
As evidenced by our regular posts on the topic, online marketers of dietary (and cognitive) supplements must be careful to comply with applicable state and federal marketing regulations. Prior to launching a supplement product marketing campaign, the best advice is to: 1) secure two double-blind independent clinical studies that substantiate any and all advertised claims; and 2) make sure that the entire campaign is vetted by seasoned advertising counsel.
In addition, online sellers must be sure to strictly comply with the provisions of ROSCA by: 1) obtaining clear consumer consent to place charges on consumer credit card or telephone accounts; 2) not sharing any sensitive consumer financial data with third party marketers or sellers without consumer express informed consent; and 3) ensuring that they employ an opt-out mechanism for recurring charges.
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The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.