Join us as we spotlight select chapters of Venable’s popular Advertising Law Tool Kit, which helps marketing teams navigate the legal risk of campaigns and promotions. Click here to download the entire Tool Kit, and tune in to the Ad Law Tool Kit Show podcast, to hear the authors of this chapter dive deeper into the issue of negative option and continuity marketing in this week’s episode.

The Federal Trade Commission (FTC), state attorneys general, and class action plaintiffs continue to scrutinize negative option and continuity offers. Negative option marketing can include pre-notification negative option plans, continuity programs, automatic renewals, and free-to-pay (or discounted price-to-pay) conversions.

The key to success in avoiding investigations and liability can be as simple as making clear and complete disclosures (prominent, clearly explained, and placed where they will be read and where consumers’ attention is focused); obtaining consumers’ express, informed affirmative consent to the negative option offer; providing a simple cancellation mechanism; sending post-order confirmations and renewal reminders; and ensuring that refunds and cancellations are processed in accordance with disclosed policies. Are the material terms of the offer disclosed in an understandable manner, including existence of the offer, the price, frequency of charges, how to cancel, and the cancellation deadline?

Marketers selling products or services on a negative option or continuity basis should consider these key questions:

  • Are the material terms of the offer disclosed in an understandable manner, including existence of the offer, the price, 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 that does not subject customers to excessive retention efforts?
  • 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 canceling? If so, you need to look at your practices.

To learn about negative option and continuity marketing, contact Roger Colaizzi, Len Gordon, or Shahin Rothermel. For more insights into advertising law, bookmark our All About Advertising Law blog and subscribe to our monthly newsletter. 

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Roger A. Colaizzi

Roger Colaizzi chairs Venable’s national Advertising Litigation group. Roger has significant trial experience litigating Lanham Act false advertising, state deceptive trade practices, unfair competition, advertising class actions, trial and continuity marketing, direct-to-consumer marketing, social networking, affiliate advertising, domain names, keyword advertising, and other…

Roger Colaizzi chairs Venable’s national Advertising Litigation group. Roger has significant trial experience litigating Lanham Act false advertising, state deceptive trade practices, unfair competition, advertising class actions, trial and continuity marketing, direct-to-consumer marketing, social networking, affiliate advertising, domain names, keyword advertising, and other e-commerce matters. He has extensive trial experience in litigating brand protection advertising issues, including anti-counterfeiting, trademark, trade dress, patent, and copyright. He has successfully brought and defended against dozens of emergency preliminary injunction motions and requests for temporary restraining orders— important remedies in competitive advertising and the protection of IP, product brands, and other proprietary assets.

Photo of Leonard L. Gordon Leonard L. Gordon

Len Gordon, chair of Venable’s Advertising and Marketing Group, is a skilled litigator who leverages his significant experience working for the Federal Trade Commission (FTC) to help protect his clients’ interests and guide their business activity. Len regularly represents companies and individuals in…

Len Gordon, chair of Venable’s Advertising and Marketing Group, is a skilled litigator who leverages his significant experience working for the Federal Trade Commission (FTC) to help protect his clients’ interests and guide their business activity. Len regularly represents companies and individuals in investigations and litigation with the FTC, state attorneys general, the Department of Justice (DOJ), and the Consumer Financial Protection Bureau (CFPB). Len also represents clients in business-to-business and class action litigation involving both consumer protection and antitrust issues. He also counsels clients on antitrust, advertising, and marketing compliance issues.

Photo of Shahin O. Rothermel Shahin O. Rothermel

Shahin Rothermel is an experienced counselor and defender who helps advertisers, retailers, merchants, and marketers advance their business goals while reducing legal and regulatory risks. Shahin provides clients with up-to-date, practical insights into the constantly evolving advertising, marketing, and e-commerce regulations, which allows…

Shahin Rothermel is an experienced counselor and defender who helps advertisers, retailers, merchants, and marketers advance their business goals while reducing legal and regulatory risks. Shahin provides clients with up-to-date, practical insights into the constantly evolving advertising, marketing, and e-commerce regulations, which allows her clients to make informed decisions. She has achieved successful resolutions, dismissals, and full walkaways in court, saving clients millions of dollars. She takes a pragmatic approach as a counselor, considering the implications of her advice for her clients’ marketing campaigns and their bottom lines.