Automatic Renewals

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By a 3-2 vote, the Federal Trade Commission (FTC) announced its Final Negative Option Rule that covers negative option programs for both consumer and B2B transactions in any media, including online, telephone, print, and in-person. The rule finalizes many of the requirements we previewed last year. Commissioner Melissa Holyoak’s dissent outlines many of the issues that those challenging the legality of the rule are likely to soon raise. 

Under the rule, companies selling goods or services with a negative option feature will be prohibited from:

  • Misrepresenting any material fact in advertising and marketing. The FTC expressly declined to limit this prohibition solely to elements of a negative option program and instead defined “material” to mean “likely to affect a person’s choice of, or conduct regarding, goods or services.” A non-exhaustive list of potential misrepresentations includes the cost, purpose, efficacy, and health or safety of the good or service.
  • Failing to disclose material terms clearly and conspicuously prior to obtaining the consumer’s billing information. The rule specifies that disclosures must be “unavoidable” and not contradicted or mitigated by, or inconsistent with, anything else in the communication.
  • Failing to obtain the consumer’s unambiguous affirmative consent before charging them. This must be done separately from any other portion of the transaction, and no other information may be included that detracts from, contradicts, or undermines the consumer’s ability to provide their express informed consent.
  • Failing to provide a simple mechanism to cancel and immediately stop charges

Continue Reading FTC Announces Final “Click-to-Cancel” Rule on Negative Options, Autorenewals, Free-to-Pay, and Subscription Services

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.Continue Reading Negative Option and Continuity Marketing: An Excerpt from the Advertising Law Tool Kit

This week, California amended its automatic renewal and continuous service offer law (ARL). Key provisions include the addition of “free-to-pay conversions,” consent obligations, misrepresentation prohibitions, request for cancellation procedures, price change notifications, and reminder and recordkeeping requirements. The new law takes effect July 1, 2025.

Express Affirmative Consent Required

The law will require “express affirmative consent” for all automatic renewal and continuous service offers. While the ARL provides no definition, class action plaintiffs’ attorneys, the California attorney general (AG), and California’s Automatic Renewal Taskforce (CART) are likely to interpret it similarly to the Federal Trade Commission’s (FTC) definition of “affirmative express consent,” i.e., “freely given, specific, informed, and unambiguous indication of an individual consumer’s wishes demonstrating agreement by the individual, such as by an affirmative action, following a clear and conspicuous disclosure to the individual.”Continue Reading California Amends Autorenewal Law, with Stricter Consent Requirements and a “One Save” Rule: Fast VAST Update

Companies that care about avoiding Federal Trade Commission (FTC) action should take heed. Last month, the FTC announced an $8.5 million settlement with Care.com, resolving claims challenging its advertising claims and automatic renewal program.

The challenge demonstrates the FTC’s willingness to use the Restore Online Shoppers’ Confidence Act (ROSCA) to target advertising claims.

Care.com offers a platform connecting job posters and job seekers. Users sign up as basic members or premium members. According to the FTC’s complaint, basic members could create job postings, but only premium members could hire. The FTC alleged that Care.com’s advertising inflated the number of jobs available on its site by including jobs “for which there is little to no chance a job seeker could be hired.”Continue Reading Handle Autorenewal Programs with Care: Federal Trade Commission Targets Care.com for Alleged Dark Patterns and Earnings Claims

Venable’s Advertising and Marketing Group hosted its 10th Advertising Law Symposium on March 21 in Washington, DC. The group welcomed in-house counsel, advertising executives, and marketing professionals for a full day of sessions on the latest developments in advertising law and what to watch for soon.

Here are some highlights:

Patchwork of Privacy Laws Makes Compliance a Challenge

Frequent data breaches and incidents like the 2018 Cambridge Analytica scandal have increased criticism of the United States’ approach to regulating privacy through a patchwork of federal and state laws and industry self-regulatory codes. But even harsh critiques have not been enough to spur Congress to pass a preemptive privacy law that would supersede the jumble of state laws and regulations and streamline things. Partner Rob Hartwell and associate Allie Monticollo said marketers and advertisers should watch what’s happening in the states and mitigate risk accordingly.Continue Reading Event in Review: 10th Advertising Law Symposium

It’s that time of year again. Regardless of what you call them—subscriptions, negative option programs, automatic renewals, or continuous service offers—states are continuing to enact and enforce new laws with increasingly strict requirements. Many new requirements have come into play since last year, so if you haven’t conducted a checkup recently, now is a great time.Continue Reading Your 2024 Outlook: California’s Enforcement Trends and New State Laws Governing Automatic Renewal Programs

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