Advertisers Urge FTC Not To Broaden 'Negative Option' Rules

The ad industry, tech companies and other businesses are urging the Federal Trade Commission to avoid broadening regulations regarding subscription services that automatically renew.

Longstanding FTC rules require companies to notify consumers about recurring fees for subscription services -- including video streaming, online news services and retail products -- and allow people to cancel.

Those regulations already protect consumers “by providing them with transparency and the ability to cancel recurring charges,” the Association of National Advertisers says in comments filed with the FTC this week.

The ANA adds that the current rules provide "clarity and flexibility for businesses in their efforts to structure marketing plans.”

The group's comments come in response to the FTC's call for input into the regulations surrounding automatically renewing subscriptions, also called “negative option marketing.”

The FTC indicated in its request for comments that companies are duping consumers with recurring fees, despite the existing rules.

“Evidence strongly suggests that negative option marketing continues to harm consumers,” the FTC wrote in October.

The agency added that recent cases, and a “high volume” of complaints “suggests there is prevalent, unabated consumer harm in the marketplace.”

The ANA counters in its comments that the FTC should “identify a clear record of this perceived harm,” so that companies can “provide meaningful comments to the Commission about the current state of negative option marketing.”

The Silicon Valley lobbying group Internet Association also urged the FTC to avoid new rules.

“New regulations would likely impose levels of standardization that would be unworkable across all industries, media, and technology supporting negative option offers in a burgeoning marketplace where consumers are willing and sophisticated participants,” the Internet Association said in joint comments with the Entertainment Software Association.

They add that subscriptions can benefit consumers as well as businesses.

“The use of subscription programs saves businesses from spending substantial monies on repeat offerings to consumers who want to continue the product or service, and the savings are reflected in the subscription price.”

But consumer advocates say more stringent rules are needed.

The National Consumers League says the FTC should require companies to send additional notifications to consumers about recurring charges prior to a cancellation deadline.

“Contracts for music or movie streaming services, gym memberships, dating websites, newspaper subscriptions, office equipment leases or even home cleaning services often contain negative option clauses,” the group writes. “These clauses cause a contract or membership to renew automatically if the consumer fails to notify a merchant of their desire to cancel via a method and at a date of the merchant’s choosing. ...The problem can be compounded when companies offer lengthy free trials, only to slam consumers with expensive and lengthy contracts should they fail to cancel prior to the end of the trial period.”

Chris Hoofnagle, a professor at the University of California, Berkeley, adds that some companies make it difficult to cancel by imposing “transaction costs,” such as requiring them to click through multiple screens.

“The FTC should prohibit the imposition of transaction costs on consumers when they attempt to cancel,” he writes.

Specifically, he urges the FTC to ban companies from requiring users to click through numerous pages, complete a CAPTCHA, re-enter credit card numbers, or jump through other hoops in order to cancel a subscription.

He also asks the FTC to require companies to delete or de-identify consumer data after people have canceled their subscriptions.

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