The Federal Trade Commission this week issued a new policy statement that warns companies against duping consumers into signing up for subscription programs that renew automatically, and also directs companies to make it easy for consumers to cancel subscriptions.
“Today’s enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection, stated. “Firms that deploy dark patterns and other dirty tricks should take notice.”
The policy statement deals with “negative option” marketing, meaning the marketing subscription services that automatically renew, unless consumers affirmatively cancel the subscriptions.
The guidance specifically says marketers should “clearly and conspicuously” disclose all material terms, including cancellation deadlines as well as price.
The statement also directed advertisers to obtain consumers' explicit consent to auto-renewals, and to provide “easy and simple” cancellation tools.
“Marketers should provide cancellation mechanisms that are at least as easy to use as the method the consumer used to buy the product or service in the first place,” the FTC stated.
The policy statement comes as the agency is crafting new regulations regarding negative options. The FTC began that process two years ago, but has yet to issue formal rules.
Citing the ongoing rulemaking initiative, Commissioner Christine Wilson dissented from the decision to issue the statement.
She said she mostly agrees with the substance of the guidance, but that publishing it while a rulemaking is under way “short-circuits the receipt of public input and conveys disdain for our stakeholders.”
The new guidance about negative options comes just two weeks after the FTC warned more than 700 companies that they could face fines if they run phony testimonials, or fail to disclose payments to endorsers.
The FTC's statement on negative options signals the agency is concerned about the relationship between consumer protection issues and competition in the marketplace, according to Jeff Greenbaum, an advertising lawyer and partner at Frankfurt Kurnit Klein & Selz.
“One of the concerns about auto renewal programs is that they limit consumers' ability to make choices, and to comparison shop and buy something else instead,” he says.
He adds that the agency's statement “really gets to the heart of that connection between the consumer protection and competition agenda.”