Advertising Law Tool Kit - Ninth Edition | 2021

Venable / 51 50 / Venable Both the Federal Trade Commission (FTC) and state attorneys general continue to scrutinize consumer advertising and marketing that use a negative option or continuity plan approach. Negative option marketing can include pre¬notification negative option plans, continuity plans, automatic renewals, and free-to-pay (or discounted price-to-pay) conversions. The difference between continuing success and recurring FTC problems can be as simple as making clear and complete disclosures (e.g., prominent, stated clearly, placed where they will be read, and proximate to where consumers’ attention is likely to be focused), obtaining consumers’ affirmative consent to the offer, providing a simple cancellation mechanism, and then ensuring that refunds and cancellations are processed in accordance with disclosed policies. Negative Option Marketing Roger A. Colaizzi rcolaizzi@Venable.com +1 202.344.8051 Shahin O. Rothermel sorothermel@Venable.com +1 202.344.4550 Leonard L. Gordon lgordon@Venable.com +1 212.370.6252 Marketers using negative option or continuity programs should consider these key questions: • Are the material terms of the negative option offer disclosed in an understandable manner, including existence of the offer, the price, the frequency of charges, how to cancel, and the cancellation deadline? • Are the disclosures clear and conspicuous, especially on mobile devices? • Are the disclosures made before the consumer agrees to buy and enroll? • Has the consumer indicated in a meaningful way that he or she understands and affirmatively consents to the negative option offer, not just to the trial offer? • Are you sending post‑transaction confirmations? • Are you complying with laws requiring notice and separate consent to the trial or free-to-pay conversion, if they apply to your offer? • Is there a convenient and effective way to cancel enrollment? • Do you provide a web-based cancellation mechanism for customers who enroll online? • Is the company honoring its cancellation and refund policies? • Is the company sending renewal reminders to customers enrolled in annual memberships? • Are your customer service representatives complying with your procedures for providing clear and conspicuous disclosures, obtaining affirmative consent to the offer, and honoring the company’s cancellation and refund policies? • Is the company receiving complaints from consumers, the BBB, or state AGs that consumers do not understand that they are enrolling in the program, do not understand the amount or frequency of recurring charges, or are having a difficult time cancelling? If so, you need to look at your practices.