Last week, the Federal Trade Commission (FTC) issued a press release, announcing a $100 million settlement with Vonage, an internet-based telephone service company, for alleged violations of the Restore Online Shoppers’ Confidence Act (ROSCA). The action underscores the FTC’s continued focus on “dark patterns” and illustrates the agency’s efforts to require companies to go beyond the plain requirements of ROSCA in enforcement settlements.  

The FTC’s complaint alleged that Vonage offered free trials to business and residential customers for telephone plans. Unless the customer took affirmative action to opt out before the trial ended, Vonage would enroll the customer in an autorenewing monthly phone plan.

Continue Reading Vonage, Autorenewals, and the FTC’s Ever-Expanding Interpretation of ROSCA

With several new state laws effective in 2022, it is becoming increasingly difficult for businesses to develop baseline compliance protocols across federal and state automatic renewal laws.

Against this backdrop, federal and state regulators continue to examine the sales practices of companies that sell products and services on an automatically renewing basis; states continue to pass new laws—and strengthen existing laws—that further embolden private plaintiffs and class action lawsuits; and the card brands have imposed increasingly strict requirements on companies offering products and services on a negative option basis.

Here we break down the compliance challenges posed by varying state laws addressing automatic renewal programs (also known as continuous service, continuity, subscription, or negative option programs), how newer card brand rules further stir the pot, and the low-hanging fruit that law enforcement agencies and private plaintiffs are going after for monetary redress and injunctive relief.

Continue Reading State Automatic Renewal Laws Are Starting to Look Like a Patchwork Quilt as the FTC Expands Enforcement of ROSCA

This week, the Federal Trade Commission (FTC) announced a proposed settlement with MoviePass to resolve allegations that the company offered an automatically renewing movie subscription program but blocked paid subscribers from using the advertised services, and failed to adequately secure subscribers’ personal data.

The FTC brought the case against MoviePass under the Restore Online Shoppers Confidence Act (ROSCA), the federal statute governing online negative option programs. The statute requires sellers to clearly and conspicuously disclose all “material terms of the transaction” and obtain consumers’ express informed consent before charging them for online negative option features.

However, the FTC’s complaint did not take issue with the company’s billing disclosures or consent mechanism. Instead, it asserted that the company’s failure to disclose its deceptive tactics that prevented subscribers from accessing all of the advertised benefits violated ROSCA. In the complaint the FTC alleged that MoviePass, Inc deceptively marketed a MoviePass subscription service that allowed customers to view movies at local theaters for a monthly fee. However, once customers purchased a subscription, MoviePass allegedly used various methods to prevent subscribers from accessing the advertised service. For example, to limit the movies that customers could view, MoviePass allegedly blocked account access by invalidating subscriber passwords under the guise of “suspicious activity or potential fraud.” The FTC asserted that resetting a password was cumbersome and often failed, precluding subscribers from regaining access. Next, the FTC alleged that MoviePass’s operators implemented a ticket verification program that required users to submit pictures of their physical movie ticket stubs for approval through the app within a certain time frame after purchase. Users who failed to submit their ticket stubs would be blocked from viewing future movies and could risk subscription termination. Third, MoviePass allegedly used “trip wires” to block certain groups of subscribers—heavy users who viewed more than three movies per month—from using the service to purchase more tickets. These allegations seem to echo statements from the FTC’s Dark Patterns workshop (we blogged about the workshop here), which discussed ways the FTC should address websites and apps that impair consumers’ autonomy, decision making, and choice.

Continue Reading Lights, Camera, Action! FTC Settlement Signals Novel Use of ROSCA

Risk-Free-TrialAs we’ve mentioned before, and as this year is unfolding, it looks like the Federal Trade Commission (“FTC”) is even more desperate to enforce the Restore Online Shoppers’ Confidence Act (“ROSCA”) than we are to find good skin care products.  The FTC has begun expanding its enforcement of ROSCA into various industries, including now the skin care industry.  Perhaps more importantly, the FTC is increasing the stakes on what constitutes adequate disclosures, forcing many marketers to spend less time looking in the mirror and more time looking at their online disclosures.

Last week, the Central District of California entered a Temporary Restraining Order and the FTC issued a complaint, alleging that since at least 2010, a number of defendants had marketed and sold skin care products on a variety of websites that ran afoul the ROSCA, the FTC Act, and the Electronic Funds Transfer Act (“EFTA”).  Continue Reading Court Attempts to Smooth out ROSCA Violations

The Federal Trade Commission (“FTC” or “the Commission”) has clearly subscribed to enforcing ROSCA recently.  On Tuesday, the FTC filed a complaint against DIRECTV’s negative option program and contract pricing structure under Section 5 of the FTC Act and ROSCA.

In the complaint, the FTC alleged that DIRECTV required customers to agree to a mandatory 24-month contract to receive television programming; customers who canceled their subscriptions before 24 months were charged an early cancellation fee.  Although the rates were set at a specific monthly charge for the first year of a 2-year customer agreement, in the second year of the agreement, the FTC alleged that DIRECTV would increase the monthly charges by 50-70% higher than customers paid in the first year.  After the first year of the agreement, customers either had to pay significant cancellation fees or pay the higher monthly price.   Continue Reading FTC Dishes Out ROSCA Complaint with Focus on Disclosures

Most of us are familiar with the pleasant experience of an arranged date or a blind date: dining under the romantic glow of the Golden Arches, learning about a day in the life of Muffin, her pure-bred Persian, or perhaps “going Dutch” on the check when all the fun finally ends.  Add to the mix online dating sites—virtual exchanges of love interests, complete with lists of mostly aspirational hobbies, and yes, user photos from ten years and twenty pounds ago.  When you sign up for an online dating service, you expect these subtle (or not so subtle) misrepresentations from other users.  What you don’t expect is the dating service doing the same—for example, by sending flirtatious notes from made up profiles.  That’s exactly what the FTC alleged last week in its second Restore Online Shopper’s Confidence Act (“ROSCA”) case ever, in which the FTC settled with a dating site for posting fake user profiles in an effort to persuade customers to sign up for premium services.

Continue Reading In Second ROSCA Case, FTC Finds Dating Site Too Clingy

A free trial of a weight loss pill is the best of both worlds, right?  Not according to the FTC, which recently brought its first Restore Online Shoppers’ Confidence Act (ROSCA) case against a group of marketers who advertised exactly that.

Weight loss substantiation is old territory for the Commission.  ROSCA, however, is not.  The FTC’s first ROSCA case, filed in Nevada district court, alleges that health companies made unsubstantiated claims that their dietary supplements would lead to weight loss, muscle building, virility, and improved skin.  More significantly, however, are the allegations surrounding the marketers’ “free trial” and “buy-one-get-one free” offers.  According to the FTC, the companies collected customers’ debit and credit card information in order to enroll customers in a negative option (subscription) program.  While there is certainly nothing wrong with subscription programs on their face, the FTC alleges that the companies here inadequately disclosed the nature of the program – they never clearly told customers their accounts would be charged each month.  ROSCA prohibits marketers from charging customers in an Internet transaction unless the marketer has clearly disclosed all of the material terms of the transaction and obtained customers’ express informed consent. In this case, according to the FTC, the marketers did not provide the required disclosures for a negative-option program before accepting payment; failed to disclose material facts about their refund and cancellation policy, among other facts; and didn’t give customers a simple, effective way to stop the automatic charges.

Continue Reading FTC Says Companies Have a Fat Chance of Getting Away With Deceptive Online Marketing in First ROSCA Case

Earlier this week, the Federal Trade Commission (FTC) held its informal hearing on the proposed amendments to the Negative Option Rule. Clearly on display was not only industries’ concern about the impact of the proposed rule, but also concern about the FTC’s haste toward implementing the rule changes.

As a refresher, the FTC generally must promulgate rules under the Magnuson-Moss Warranty Federal Trade Commission Improvements Act (Mag-Moss) instead of the less-stringent Administrative Procedures Act. Under Mag-Moss, the FTC must first issue an advanced notice of proposed rulemaking (ANPR) seeking public comment, issue a notice of proposed rulemaking (NPRM), have reason to believe that the conduct at issue is “prevalent,” conduct informal hearings allowing parties to present their views and finally publish the final rule with a “statement of basis and purpose” accompanying the rule.

Continue Reading Unpacking the FTC’s Negative Option Rule Informal Hearing

On December 20, 2023, New York Attorney General Letitia James filed a Petition in state court alleging Sirius XM Radio’s autorenewal practices violated New York’s autorenewal law. In the lawsuit, New York alleges that Sirius XM, an audio entertainment company headquartered in New York, made it difficult for customers to cancel their subscriptions.

New York’s automatic renewal law requires any business that makes an automatic renewal offer or continuous service offer to provide a cost-effective, timely, and easy-to-use mechanism for cancellation. The AG alleges that Sirius violated this requirement by:

Continue Reading New York Attorney General: Sirius XM Customers “Frustrated” When Trying to Cancel Subscriptions

On September 19, Sam Levine, the director of the Federal Trade Commission’s Bureau of Consumer Protection, outlined the agency’s priorities at the annual conference of the National Advertising Division. Here are the highlights:

Levine outlined three pillars of the enforcement agenda:

  • Focus on the practices that cause the most consumer harm
  • Obtain relief that not only halts the violative conduct but also changes incentives to engage in such conduct in the future
  • Use tools beyond case-by-case enforcement to change behavior (think rule making)

After also noting that the pace of enforcement at the FTC had increased, Levine then focused on some substantive areas of concern, starting with junk fees and dark patterns.

Continue Reading FTC Consumer Protection Chief Sam Levine Outlines FTC Priorities at the NAD Conference