Wireless News in the US, Focus on: FTC Click-to-Cancel Rules

Note: This is not legal advice. 

Sources:

• "FTC Finalizes ‘Click to Cancel’ Rule | Sheppard Mullin Richter & Hampton LLP - JDSupra"
• "FTC Finalizes “Click-to-Cancel” Rule | Foley & Lardner LLP"
• "FTC ‘Click-to-Cancel’ Rule Requires Canceling Recurring Charges to Be as Easy as Signing Up – Publications"
• "Negative Option"
• "p064202_negative_option_rule.pdf" (FTC Final Rule document)

Executive Summary:

The Federal Trade Commission (FTC) finalized the "Click to Cancel" Rule, against deceptive or unfair negative option marketing practices. The rule aims to make it easier for consumers to cancel recurring subscriptions and memberships. It expands upon existing laws like the Restore Online Shoppers' Confidence Act (ROSCA).

Key Themes and Provisions:

1. Expanded Scope: The rule applies to all forms of negative option marketing, including but not limited to automatic renewals, continuity plans, free-to-pay conversions, and pre-notification plans.
2. Prohibition of Misrepresentations.
3. Clear and Conspicuous Disclosures: Sellers must provide clear and conspicuous disclosures of all material terms before obtaining billing information. This includes: 
   1. Existence of the negative option feature: Clearly stating that the offer involves a recurring subscription.
   2. Total cost: Disclosing all costs involved, including recurring charges and any price increases after trial periods.
   3. Billing information transfer: Disclosing if billing information will be shared with third parties.
   4. Cancellation mechanism: Describing a straightforward method for consumers to stop recurring charges.
4. Unambiguously Affirmative Consent: Sellers must obtain express informed consent before charging consumers, separate from any other part of the transaction and cannot be bundled with other agreements.
5. Simple Cancellation Mechanism: The rule mandates that cancellation must be as easy as signing up. Consumers should be able to cancel online through a readily accessible method.
6. "Saves" Provision: The rule restricts the use of "saves," defined as attempts to dissuade consumers from cancelling by offering alternative deals or discounts.

Implications for Businesses:

• Reviewing and updating disclosures
• Implementing straightforward cancellation mechanisms
• Obtaining separate and affirmative consent for the negative option feature
• Training customer service representatives

Glossary of Key Terms

• Negative Option Feature: A contract provision where a consumer's inaction or silence is interpreted as consent to purchase a good or service.
• Automatic Renewal: A type of negative option where a subscription automatically renews at the end of a billing cycle unless the consumer actively cancels.
• Continuity Plan: A negative option program where consumers receive periodic shipments of goods or services until they cancel.
• Free-to-Pay Conversion: A negative option where consumers receive a free or discounted trial period, after which they are automatically charged.
• Pre-notification Negative Option Plan: A program where consumers receive periodic notices offering products or services and must actively decline to avoid being charged.
• UDAP: "Unfair or deceptive acts and practices" statutes enforced by various agencies to protect consumers.
• Preemption: A situation where a federal law overrides or nullifies a state law.
• Severability Clause: A

Thank you for listening!
-Mario Mejia