Ad Law Insights - Legal and Regulatory Updates
Latest FTC and state attorneys general compliance, investigation and enforcement developments of concern to advertisers and marketers
The Federal Trade Commission recently announced a proposed a “click to cancel” provision requiring sellers to make it as simple for consumers to cancel their enrollment as it was to enroll.
According to the FTC, if consumers are unable to easily leave any program when they want to, the negative option feature becomes nothing more than a way to continue charging them for products they no longer want. To address this issue, the proposed rule would require businesses to make it at least as easy to cancel a subscription as it was to start it. For example, if a consumer can sign-up online, cancellation much be able to be effectuated on the same website, in the same number of steps.
But that’s not all the FTC is proposing regarding subscriptions and recurring payments.
The FTC is also proposing:
- Expanded Scope: The proposed “Rule Concerning Recurring Subscriptions and Other Negative Option Plans” would cover all forms of negative option marketing, whether via internet, phone, through print materials, and in-person transactions. Any persons “selling, offering, promoting, charging for, or otherwise marketing a negative option feature” would be subject to the new Rule.
- Additional Consent Requirements: The proposed rule requires marketers to obtain independent consent for the negative option feature and precludes the inclusion of additional information that could interfere a consumer’s ability to provide consent. It sets forth requirements about how consent must be obtained. Marketers would be required to obtain consent for the whole transaction and maintain proof for three years.
National Advertising Division Recommends that Pier 1 Provide Enhanced Clear and Conspicuous Automatic Renewal Program Disclosures
As part of the independent, non-profit BBB National Programs, the National Advertising Division independently evaluates and regulates the truth and accuracy of national advertising. It also works to increase the public’s confidence in advertising. The NAD also offers dispute resolution process for advertisers.
Recently, the NAD reviewed Pier 1’s automatic renewal subscription rewards loyalty program that charges consumers a recurring monthly or annual fee for products discounts, and free shipping and returns on select items. In doing so, the NAD recommended that the company provide enhanced “clear and conspicuous” disclosures.
As described by the NAD, items added to a consumer’s cart on the company website automatically include the rewards subscription via a pre-checked box. Additionally, the terms of the renewal subscription program appeared under the pre-checked box. According to the NAD, consumers are required to take affirmative action to uncheck the box to opt-out of the automatically renewing subscription and cost related thereto.
According to the NAD, one issue was whether promoting a lower price for a product or service is deceptive if that price is only made available to those that agree to the automatically renewing subscription. The other issue was whether the material terms of the automatic renewal subscription program were “clearly and conspicuously” disclosed prior to a consumer’s decision to make a purchase.
The NAD ultimately concluded that, unless the terms of the automatically renewing subscription are appropriately disclosed, it is misleading to promote a discounted price if the discount is only available when a consumer consents to a subscription.
FTC advertising compliance and defense lawyer Richard B. Newman was recently quoted in an article for Law.com titled “FTC Bags First Settlement in Probe of ‘Review Hijacking’ in E-Commerce.”
The article discusses the FTC’s first case alleging “review hijacking,” in which a marketer steals or repurposes reviews of another product. The case involves a marketer of vitamins and other supplements that allegedly carried out this tactic by merging its new products on Amazon with different well-established products that had more ratings, reviews and badges.
Mr. Newman stated, “[n]ot only is the FTC currently seeking to promulgate us that come with big civil penalties for such conduct, it has recently blanketed the digital advertising industry with warning letters.”
According to the FTC, the marketer “took advantage of an Amazon feature that allows vendors to create or request the creation of ‘variation’” relationships between some products that are similar but differ only in narrow, specific ways – such as color, size, quantity, or flavor. Products with a variation relationship share the same product detail page on Amazon.com and appear as alternative choices, so shoppers can compare and choose among similar products.”
“The product detail page of products that are in a variation relationship displays the total number of ratings, the average star rating, and the reviews for all of the products in the variation relationship,” the FTC said in its complaint. “They also share any ‘#1 Best Seller’
The Federal Trade Commission recently announced that it has taken action to stop an alleged interconnected web of operations purportedly responsible for delivering tens of millions of unwanted Voice Over Internet Protocol and ringless voicemail bogus debt service robocalls to consumers nationwide.
The Department of Justice (DOJ) filed the complaint in federal court on the FTC’s behalf.
The DOJ also filed a proposed consent order against one of the companies and individuals involved in the operation, which would, if approved by the court, bar them from making further misrepresentations about debt relief services and ordering them to comply with the Telemarketing Sales Rule.
“This case targets the ecosystem of companies who perpetrate illegal telemarketing to cheat American consumers who are struggling financially,” said FTC lawyer Samuel Levine, Director of the FTC’s Bureau of Consumer Protection. “The FTC will continue to take aggressive action to protect consumers from the scourge of illegal robocalls.”
“The Department of Justice is committed to stopping individuals and companies from making illegal robocalls and peddling predatory debt relief services,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “We will continue to work with the FTC to enforce the FTC Act and the Telemarketing Sales Rule against those who use misleading sales tactics to prey on consumers.”
According to the complaint, Stratics Networks, Inc.’s outbound calling service enabled its clients to route and transmit millions of robocalls using VoIP technology.
FCC Proposes Rule That Would Severely Impact Text Messaging and Result in BIG Lead Generation Implications
Lead generators beware. The FTC has issued a Notice of Proposed Rulemaking that would turn the lead generation industry on its head.
Amongst numerous items currently on the FCC’s agenda, there is discussion on closing the “lead generator” loophole.
The FCC Chairwoman has proposed a new rule that would block unlawful robotexts. Read more, here.
The FCC first issued a Report and Order requiring mobile wireless providers to block text messages from numbers on a reasonable Do Not Originate list, which includes numbers that purport to be from invalid, unallocated or unused North American Numbering Plan numbers, and numbers for which the subscriber to the number has requested that texts purporting to originate from that number be blocked. The FCC already requires similar blocking of voice calls by gateway providers.
The Report and Order would also ensure that any erroneous text blocking can be reported to the provider doing the blocking by requiring mobile wireless providers to maintain a single point of contact for texters to report erroneously blocked texts. This single point of contact is already required for voice call blocking.
Even more significant for lead generators is that the FCC has issued a NPRM that would require carriers to “investigate and potentially block texts from a sender after they are on notice from the Commission that the sender is transmitting suspected illegal texts…”
Additionally, the FCC has proposed an extension of DNC protections to text messages.
About This Blog and Hinch Newman’s Advertising + Marketing Practice
Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.