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negative option

FTC Obtains $10M Settlement for Negative Option Marketing

by David Klein

On September 1, 2020, Age of Learning Inc., d/b/a ABCmouse (“ABCmouse”), agreed to pay $10 million to settle an enforcement action brought by the Federal Trade Commission (“FTC”) for engaging in alleged illegal marketing and billing practices. According to the FTC, ABCmouse, which operates a membership-based online learning tool for children, enrolled unsuspecting consumers in negative option marketing programs without their consent by failing to inform parents that their subscriptions would renew automatically.  

What did the FTC allege?

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FTC Sues Negative Option Marketers

by David Klein

On May 13, 2020, the Federal Trade Commission filed a complaint in the Eastern District of Pennsylvania against American Future Systems, Inc. (“AFS”), a Pennsylvania-based telemarketing company, and its alleged co-conspirator, International Credit Recovery, Inc. (“ICR”) (AFS and ICR, collectively, “Defendants”), for conspiring to bilk businesses into paying for publications that they never ordered. Pursuant to the scheme, AFS made unsolicited calls to various businesses and organizations across the country in an effort to dupe unsuspecting employees into agreeing to receive free samples of the company’s publications. In reality, AFS would enroll the businesses in negative option programs without their consent. According to the FTC, when the businesses failed to pay for these products, AFS referred the matter to ICR, a debt collection agency, in order to prod the businesses into making payment. 

What are the FTC’s allegations?

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FTC Calls for Public Comment on Negative Option Marketing

by David Klein

September 30, 2019

negative-option-marketing
Negative Option Marketing and the FTC

On September 25, 2019, the Federal Trade Commission (“FTC” or “Commission”) published an Advance Notice of Proposed Rulemaking calling for public comment on the need to amend the current “Rule Concerning the Use of Prenotification Negative Option Plans” (the “Negative Option Rule” or “Rule”). Negative option marketing, where a consumer’s silence constitutes consent to an offer, can come in several different forms. According to the FTC, the current Rule fails to address: 1) all forms of negative option marketing; 2) across all types of media.

How Would the FTC Amend the Current Rule?[Read More]

FTC Settles Another Free Trial Law Investigation

by David Klein

June 6, 2019

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Free Trial Law Settlement

Last week, the Federal Trade Commission (“FTC”) announced that it had settled a free product trial lawsuit brought against Triangle Media Corp., Jasper Rain Marketing LLC, Hardwire Interactive Inc., Global Northern Trading Ltd., Brian Phillips, and Devin Keer (collectively, “Defendants”). The FTC’s free trial law complaint and amended complaint both alleged that Defendants violated Section 5 of the FTC Act (i.e., for unfair or deceptive acts or practices), the Restore Online Shoppers’ Confidence Act (i.e., for failure to conspicuously disclose material terms prior to enrolling a consumer in an automatic renewal), and the Electronic Fund Transfer Act (“EFTA”) (i.e., for failure to obtain consumer consent for an electronic funds transfer), by using “risk-free” trial offers to enroll consumers in negative option programs without their consent. The FTC’s free trial law complaint sought a permanent injunction, restitution, disgorgement, and costs. 

How did misuse of the word “free” (combined with other misstatements) result in Defendants being named in an FTC Complaint? [Read More]

Mastercard Free Trial Requirements

by David Klein

March 6, 2019 

Mastercard-free-trial
Mastercard Free Trial Rules

Last month, Mastercard Incorporated (“Mastercard”) announced an important change to its policies that will require merchants to provide specific automatic enrollment disclosures to consumers at the conclusion of all free-trial offers. The Mastercard free trial terms are intended to protect consumers from merchants that offer misleading “free to pay” conversions, continuity plans, and negative option plans. Mastercard’s free trial rules go into effect April 2019.

What is the significance of Mastercard’s free trial terms? [Read More]

Skincare Product Marketer’s Continuity Billing Draws FTC Scrutiny

by David Klein

March 4, 2019

continuity-billing
Continuity Billing Suit

Beauty product marketer, F9 Advertising, LLC, several related entities, and their individual owner, have been sued by the Federal Trade Commission (“FTC”) for allegedly fraudulent continuity billing practices.   The FTC alleges that the non-compliant continuity billing practices and related marketing violate the Restore Online Shoppers’ Confidence Act (“ROSCA”).

How do the entities’ policies violate continuity billing regulations?

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FTC Settles Negative Option Lawsuit

by David Klein

April 18, 2018

negative-option
Negative Option Lawsuit

The Federal Trade Commission (“FTC”) entered into a settlement agreement this week with dozens of related entities and their individual owners in connection with a negative option marketing operation.  The FTC had commenced a lawsuit against the parties alleging that the individual owners operated nearly sixty (60) companies that sold personal care products, including tooth-whitening products, through myriad marketing websites on which trial offers associated with illegal negative option plans were available.  The FTC further alleged that the websites utilized both deceptive claims and misleading disclosures which caused consumers to provide billing information to pay for trial products only to incur recurring monthly fees without their knowledge or consent.

What are the Relevant Terms of the Settlement?

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Online Lingerie Marketer Settles Negative Option Lawsuit With FTC

by David Klein

November 22, 2017

negative-option-lawsuit
Negative Option Lawsuit Settles.

The Federal Trade Commission (“FTC”) has announced that online lingerie marketer AdoreMe, Inc. (“AdoreMe”) has settled claims alleging that its deceptive negative option enrollment and cancellation practices violated both Section 5 of the FTC Act and the Restore Online Shoppers’ Confidence Act.  The underlying complaint in the negative option lawsuit alleged improper use of a negative option continuity plan, where consumer credit cards were billed $39.95 a month on a recurring basis until consumers attempted to cancel their subject plans.  The complaint explains that the defendants failed to include clear and accurate disclosures concerning the terms and conditions of their negative option plans and made it difficult for customers to cancel their memberships.

What Else Did the FTC Deem Violative of Applicable Law?

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