New Year, New Rule: FTC to Review Updates to Negative Option Rule During January Informal Hearing

By Leonard L. Gordon & Liz Clark Rinehart on December 12, 2023

Posted in Consumer Protection, FTC, Negative Option Marketing, Subscriptions and Renewals

In March, the Federal Trade Commission (FTC) asked for comments on a proposal to replace the Prenotification Negative Option Rule with a more expansive Negative Option Rule. Now that the FTC has had the chance to review those comments, the FTC has set an informal hearing to allow for testimony from six of the over 1,000 commenters.

Each presenter will be limited to ten minutes but can supplement their remarks with written content. The FTC has appointed Carol Fox Foelak, an administrative law judge at the Securities and Exchange Commission (SEC), to serve as presiding officer.

The proposed Negative Option Rule introduces several significant updates. First, the proposed rule covers subscriptions and recurring payment purchases more broadly, where the current rule covers only prenotification plans.

Second, the proposed rule includes a “click to cancel” provision that would require a simple cancellation mechanism to immediately halt any recurring charges. This would potentially include providing the simple cancellation mechanism through the same medium consumers used to initiate the agreement.

Third, the proposed rule would require sellers to obtain consumers’ consent before consumers are pitched additional offers or modifications, or a “save,” during the cancellation process.

And, finally, the proposed rule would require annual reminders to consumers enrolled in a negative option program.

The testimony presented at the informal hearing may affect the contours of the final rule and will be part of the public record in the rulemaking process. Thus, the informal hearing may shed further light on how narrow or expansive a view the FTC may take in issuing its final rule. The informal hearing is set to take place on January 16, 2024, is open to the public, and can be accessed through the FTC’s website.

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