Negative Option Marketing

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The U.S. Court of Appeals for the Eighth Circuit vacated the Federal Trade Commission’s Rule Concerning Subscriptions and Other Negative Option Plans (often referred to as the “Click-to-Cancel” rule) on July 8, just days before the FTC was set to begin enforcement of the rule.

The decision resolved various consolidated petitions challenging the rule on grounds that it exceeded the scope of the FTC’s authority, was not promulgated in accordance with necessary rulemaking procedures, and was overly broad. The winning argument, though, was that the FTC skipped the critical step of issuing a preliminary analysis of the benefits and effects of the proposed rule and any reasonable alternatives, because it initially failed to treat the rule as “economically significant” to the national economy.Continue Reading Eighth Circuit Cancels FTC Negative Option Rule: What Does It Mean?

On Friday, ​the Federal Trade Commission voted to defer the compliance deadline for the amended Negative Option Rule by 60 days. The Commission issued a statement on the new deadline.

The delay reflects the FTC’s response to various commenters who expressed concern that, “given the complexities” of these provisions, it would take a substantial…

This week, the Federal Trade Commission (FTC) filed a lawsuit in federal court against rideshare and delivery company Uber for allegedly deceptive subscription practices, including making it unreasonably difficult to cancel.

In the accompanying press release, FTC Chair Andrew Ferguson made clear that regulatory scrutiny of negative option and continuity programs will remain a priority: “Americans are tired of getting signed up for unwanted subscriptions that seem impossible to cancel. The Trump-Vance FTC is fighting back on behalf of the American people.” The agency voted 2-0-1 to file the complaint, with Commissioner Mark R. Meador recused.Continue Reading FTC Makes Clear It Will Continue Regulating Subscription Services and Signals Enforcement Priority for Negative Option Rule in Lawsuit Against Uber

Join us as we spotlight select chapters of Venable’s popular Advertising Law Tool Kit, which helps marketing teams navigate their organization’s legal risk. Click here to download the entire Tool Kit.

The Federal Trade Commission, state attorneys general, and class action plaintiffs continue to scrutinize negative option and continuity offers, including automatic renewals, free-to-pay conversions, and continuity programs.

The FTC’s updated Negative Option Rule mandates clear disclosures, unambiguous affirmative consent, and simple cancellation mechanisms. Marketers must disclose material terms such as price, frequency, and cancellation details prominently and understandably, including on mobile devices. Consumers should give informed consent and receive post-transaction confirmations and renewal reminders. Companies must honor cancellation and refund policies and address complaints effectively.Continue Reading Negative Option and Continuity Marketing

Ending speculation and uncertainty about whether new leadership at the Federal Trade Commission (FTC) would repeal or continue to defend the agency’s Negative Option Rule, which regulates offerings such as autorenewal of subscription services, this week the agency filed a brief at the Eighth Circuit defending the rule—something of a surprise.

We previously discussed the arguments raised by industry groups that are challenging the rule. Broadly, the challengers assert that the rule exceeds the FTC’s statutory authority, is procedurally defective, and is arbitrary and capricious. The Eighth Circuit previously denied petitioners’ request to stay the rule from taking effect pending litigation.Continue Reading FTC Files Brief Defending “Click to Cancel” Negative Option Rule

Last week, a security services company and several trade groups filed their merits brief in the U.S. Court of Appeals for the Eighth Circuit challenging the Federal Trade Commission’s (FTC) newly adopted Negative Option Rule, also called Click-to-Cancel. The rule introduces a host of requirements for companies selling goods or services with a negative option feature in both consumer and B2B transactions, as we outlined last year. Notably, a negative option seller must make cancellation as simple as signing up, including providing an easy online cancellation method if consumers signed up online.

The rule went partially into effect on January 14, 2025, with the prohibition on misrepresentations of material facts relating to the promotion or offering for sale of any good or service with a negative option. The remainder of the rule covering consent and cancellation requirements takes effect in May 2025.

The court previously denied petitioners’ request to stay the rule from taking effect pending litigation.Continue Reading FTC’s “Click-to-Cancel” Rule Challenged by Industry in the Eighth Circuit

As we previewed last week, industry and trade groups wasted no time in filing challenges against the Federal Trade Commission’s (FTC) Final Negative Option Rule.

The Michigan Press Association and the National Federation of Independent Businesses filed a petition challenging the rule in the Sixth Circuit Court of Appeals, while a separate petition was filed by multiple trade associations in the Fifth Circuit. Both cases have asked federal courts of appeals to determine whether the FTC’s issuance of the rule exceeded the agency’s authority and if the FTC’s processes were arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act. The petitions also ask the courts to determine if the FTC complied with the agency’s Magnuson-Moss rulemaking requirements, claiming the rule was “unsupported by substantial evidence” and based on determinations that did not allow for consideration of “disputed material facts.”

The petitions request that the courts vacate and set aside the rule. If either petition is granted, the FTC will not be able to enforce its Negative Option Rule.

Additional challenges to the FTC’s Negative Option Rule might continue. And similar challenges against FTC rules have found success; for example, the FTC’s Non-Compete Rule was set aside and ruled unenforceable nationwide. That decision is currently on appeal at the Fifth Circuit.Continue Reading Business Groups Rush to File Federal Court Challenges to the FTC’s Negative Option “Click-to-Cancel” Rule

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

The first episode of Venable’s Ad Law Tool Kit Show, Season 2,is now available. Listen to “Negative Option Marketing: Part 2” here, or search for it in your favorite podcast player.

Negative option marketing can include pre-notification negative option plans, continuity programs, automatic renewals, and free-to-pay conversions. This marketing strategy continues to invite scrutiny from the Federal Trade Commission (FTC), state attorneys general, and class action plaintiffs.

In this episode, I talk to my co-host on this podcast, Shahin Rothermel, and
Venable partner Ari Rothman about the keys to success in avoiding investigations and liability.Continue Reading Listen to Venable’s Ad Law Tool Kit Show Podcast– “Negative Option Marketing: Part 2”