[Federal Register Volume 84, Number 191 (Wednesday, October 2, 2019)]
[Proposed Rules]
[Pages 52393-52398]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21265]


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FEDERAL TRADE COMMISSION

16 CFR Part 425

RIN 3084-AB54


Rule Concerning the Use of Prenotification Negative Option Plans

AGENCY: Federal Trade Commission.

ACTION: Advance notice of proposed rulemaking; request for public 
comment.

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SUMMARY: The Federal Trade Commission (``FTC'' or ``Commission'') seeks 
public comment on the need for amendments to the Commission's ``Rule 
Concerning the Use of Prenotification Negative Option Plans'' (i.e., 
``Negative Option Rule'' or ``Rule'') to help consumers avoid recurring 
payments for products and services they did not intend to order and to 
allow them to cancel such payments without unwarranted obstacles.

DATES: Comments must be received on or before December 2, 2019.

ADDRESSES: Interested parties may file a comment online or on paper, by 
following the instructions in the Request for Comment part of the 
SUPPLEMENTARY INFORMATION section below. Write ``16 CFR part 425--
Negative Option Rule, Project No. P064202'' on your comment, and file 
your comment online at https://www.regulations.gov/, by following the 
instructions on the web-based form. If you prefer to file your comment 
on paper, write ``Negative Option Rule (16 CFR part 425) (Project No. 
P064202)'' on your comment and on the envelope, and mail it to the 
following address: Federal Trade Commission, Office of the Secretary, 
600 Pennsylvania Avenue NW, Suite CC-5610 (Annex J), Washington, DC 
20580; or deliver your comment to the following address: Federal Trade 
Commission, Office of the Secretary, Constitution Center, 400 7th 
Street SW, 5th Floor, Suite 5610 (Annex J), Washington, DC 20024. If 
possible, submit your paper comment to the Commission by courier or 
overnight service.

FOR FURTHER INFORMATION CONTACT: Hampton Newsome (202-326-2889), 
Attorney, Division of Enforcement,

[[Page 52394]]

Bureau of Consumer Protection, Federal Trade Commission, 600 
Pennsylvania Avenue NW, Washington, DC 20580.

SUPPLEMENTARY INFORMATION: 

I. Overview

    The Commission seeks comments on ways to improve its existing 
regulations for negative option marketing, a common form of marketing 
where the absence of affirmative consumer action constitutes assent to 
be charged for goods or services. Negative option offers are widespread 
in the marketplace and can provide substantial benefits for sellers and 
consumers. However, consumers cannot reap such benefits when marketers 
fail to make adequate disclosures, bill consumers without their 
consent, or make cancellation difficult or impossible. Over the years, 
such problematic negative option practices have remained a persistent 
source of consumer harm, often saddling consumers with recurring 
payments for products and programs they did not intend to purchase or 
did not want. In the past, the Commission has sought to address such 
practices through individual law enforcement cases and a patchwork of 
regulations. Nevertheless, problems persist, and consumers continue to 
submit thousands of complaints to the FTC each year about negative 
option marketing. To address these concerns, the Commission seeks 
comments on ways to improve existing regulatory requirements, including 
whether it should use its rulemaking authority under the FTC Act to 
expand the scope and coverage of the existing Negative Option Rule.\1\
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    \1\ Section 18 of the FTC Act authorizes the Commission to 
promulgate rules specifying acts or practices in or affecting 
commerce which are unfair or deceptive. 15 U.S.C. 57a(a)(2).
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II. Negative Option Marketing

    A ``negative option'' is any type of sales term or condition that 
allows a seller to interpret a customer's silence, or failure to take 
an affirmative action, as acceptance of an offer.\2\ Negative option 
marketing generally falls into four categories: Prenotification 
negative option plans, continuity plans, automatic renewals, and free-
to-pay or nominal-fee-to-pay conversion offers.
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    \2\ The Commission's Telemarking Sales Rule defines a negative 
option feature as a provision in an offer or agreement to sell or 
provide any goods or services ``under which the customer's silence 
or failure to take an affirmative action to reject goods or services 
or to cancel the agreement is interpreted by the seller as 
acceptance of the offer.'' 16 CFR 310.2(w).
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    Prenotification plans are the only negative option practice 
currently covered by the Commission's Negative Option Rule. Under such 
plans (e.g., book-of-the-month clubs), sellers send periodic notices 
offering goods to participating consumers and then send--and charge 
for--those goods only if the consumers take no action to decline the 
offer. The periodic announcements and shipments can continue 
indefinitely. In continuity plans, consumers agree in advance to 
receive periodic shipments of goods or provision of services (e.g., 
bottled water delivery), which they continue to receive until they 
cancel the agreement. In automatic renewals, sellers (e.g., a magazine 
publisher) automatically renew consumers' subscriptions when they 
expire and charge for them, unless consumers affirmatively cancel the 
subscriptions. Finally, in free-to-pay or nominal-fee-to-pay plans, 
consumers receive goods or services for free (or at a nominal fee) for 
a trial period. After the trial period, sellers automatically begin 
charging a fee (or higher fee) unless consumers affirmatively cancel or 
return the goods or services.
    Some negative option offers include upsell or bundled offers, where 
sellers use consumers' billing data for additional products from the 
same seller or pass consumers' billing data to a third party for 
additional offers. An upsell occurs when a consumer completes a first 
transaction and then receives a solicitation for an additional product 
or service. A bundled offer occurs when a seller packages two products 
or services together so that they cannot be purchased separately.

III. FTC's Negative Option Rule

    The Commission first promulgated the Rule in 1973 pursuant to the 
FTC Act, 15 U.S.C. 41 et seq., after finding that some negative option 
marketers had committed unfair and deceptive marketing practices that 
violated Section 5 of the Act, 15 U.S.C. 45. As discussed above, the 
Rule only applies to prenotification plans for the sale of goods and 
does not reach most modern negative option marketing.\3\
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    \3\ The Rule defines ``negative option plan'' narrowly to apply 
only to prenotification plans. 16 CFR 425.1(c)(1). The Rule covers 
prenotification plan marketing in all media. In 1998, the Commission 
clarified that the Rule ``covers all promotional materials that 
contain a means for consumers to subscribe to prenotification 
negative option plans, including those that are disseminated through 
newer technologies . . . .'' 63 FR 44555, 44561 (Aug. 20, 1998).
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    The Rule requires prenotification plan sellers to clearly and 
conspicuously disclose their plan's material terms before consumers 
subscribe. It enumerates seven material terms sellers must disclose 
clearly and conspicuously including: (1) How subscribers must notify 
the seller if they do not wish to purchase the selection; (2) any 
minimum purchase obligations; (3) the subscribers' right to cancel; (4) 
whether billing charges include postage and handling; (5) that 
subscribers have at least ten days to reject a selection; (6) that if 
any subscriber is not given ten days to reject a selection, the seller 
will credit the return of the selection and postage to return the 
selection, along with shipping and handling; and (7) the frequency with 
which announcements and forms will be sent.\4\ In addition, sellers 
must follow certain procedures, including: Abiding by particular time 
periods during which sellers must send introductory merchandise and 
announcements identifying merchandise the seller plans to send; giving 
consumers a specified period to respond to announcements; providing 
instructions for rejecting merchandise in announcements; and promptly 
honoring written requests to cancel from consumers who have met any 
minimum purchase requirements.\5\
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    \4\ 16 CFR 425.1(a)(1)(i)-(vii).
    \5\ 16 CFR 425.1(a)(2) and (3); 425.1(b).
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IV. Existing Regulatory Requirements

    In addition to the Negative Option Rule, several other statutes and 
regulations address harmful negative option practices. First, Section 5 
of the FTC Act, which prohibits unfair or deceptive acts or practices, 
has traditionally served as the Commission's primary mechanism for 
addressing these types of cases. Additionally, the Restore Online 
Shoppers' Confidence Act (``ROSCA'') (15 U.S.C. 8401-8405), the 
Telemarketing Sales Rule (16 CFR part 310), the Postal Reorganization 
Act (``PRA'') (i.e., the Unordered Merchandise Statute) (39 U.S.C. 
3009), and the Electronic Fund Transfer Act (``EFTA'') (15 U.S.C. 1693-
1693r) all address various aspects of negative option marketing. ROSCA, 
however, is the only law primarily designed to do so.

A. Section 5 of the FTC Act

    The basic consumer protection statute enforced by the Commission is 
Section 5(a) of the FTC Act (15 U.S.C. 45(a)(1)). This provision states 
that ``unfair or deceptive acts or practices in or affecting commerce . 
. . are . . . declared unlawful.'' \6\ In past guidance

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and cases, the FTC has highlighted five basic Section 5 requirements 
that negative option marketing must follow to avoid deception.\7\ 
First, marketers must disclose the material terms of a negative option 
offer including, at a minimum, the following key terms: The existence 
of the negative option offer; the offer's total cost; the transfer of a 
consumer's billing information to a third party, if applicable; and how 
to cancel the offer. Second, Section 5 requires that disclosures be 
clear and conspicuous. Third, sellers must disclose the material terms 
of the negative option offer before consumers agree to the purchase. 
Fourth, marketers must obtain consumers' consent to such offers. 
Finally, marketers must not impede the effective operation of promised 
cancellation procedures, and should honor cancellation requests that 
comply with such procedures.
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    \6\ The FTC Act defines ``unfair or deceptive acts or 
practices'' to include such acts or practices involving foreign 
commerce that cause or are likely to cause reasonably foreseeable 
injury within the United States or involve material conduct 
occurring within the United States (15 U.S.C. 45(a)(4)(A)). It also 
defines ``unfair'' practices as those that cause or are likely ``to 
cause substantial injury to consumers which is not reasonably 
avoidable by consumers themselves and not outweighed by 
countervailing benefits to consumers or to competition'' (15 U.S.C. 
45(n)).
    \7\ See Negative Options: A Report By the Staff of the FTC's 
Division of Enforcement, 26-29 (Jan. 2009), https://www.ftc.gov/sites/default/files/documents/reports/negative-options-federal-trade-commission-workshop-analyzing-negative-option-marketing-report-staff/p064202negativeoptionreport.pdf. In discussing the five 
principal Section 5 requirements related to negative options, the 
report cites to the following pre-ROSCA cases, FTC v. JAB Ventures, 
No. CV08-04648 (C.D. Cal. 2008); FTC v. Complete Weightloss Center, 
No. 1:08cv00053 (D.N.D. 2008); FTC v. Berkeley Premium 
Nutraceuticals, No. 1:06cv00051 (S.D. Ohio 2006); FTC v. Think All 
Publ'g, No. 4:07cv11 (E.D. Tex. 2006); FTC v. Hispanexo, No. 
1:06cv424 (E.D. Va. 2006); FTC v. Consumerinfo.com, No. SACV05-801 
(C.D. Cal. 2005); FTC v. Conversion Mktg., No. SACV04-1264 (C.D. 
Cal. 2004); FTC v. Mantra Films, No. CV03-9184 (C.D. Cal. 2003); FTC 
v. Preferred Alliance, No. 103-CV0405 (N.D. Ga. 2003); United States 
v. Prochnow, No. 102-CV-917 (N.D. Ga. 2002); FTC v. Ultralife 
Fitness, Inc., No. 2:08-cv-07655-DSF-PJW (C.D. Cal. 2008); In the 
Matter of America Isuzu Motors, FTC Docket No. C-3712 (1996); FTC v. 
Universal Premium Services, No. CV06-0849 (C.D. Cal. 2006); FTC v. 
Remote Response, No. 06-20168 (S.D. Fla. 2006); and FTC's Dot Com 
Disclosures guidance.
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    Although adherence to these five principles should minimize the 
likelihood of non-compliance with Section 5, the legality of a 
particular negative option depends on an individualized assessment of 
the advertisement's net impression and the marketer's business 
practices. In addition to these deception-related requirements, the 
Commission has indicated that billing consumers without consumers' 
express informed consent is an unfair act under the FTC Act.\8\
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    \8\ Courts have found unauthorized billing to be unfair under 
the FTC Act. See, e.g., FTC. v. Neovi, Inc., 604 F.3d 1150, 1157-59 
(9th Cir. 2010), amended by 2010 WL 2365956 (9th Cir. June 15, 
2010); FTC v. Amazon.com, Inc., No. C14-1038-JCC, 2016 WL 10654030, 
at *8 (W.D. Wash. Apr. 26, 2016); FTC v. Ideal Fin. Sols., Inc., No. 
2:13-CV-00143-JAD, 2015 WL 4032103, at *8 (D. Nev. June 30, 2015).
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B. ROSCA

    Enacted by Congress in 2010 to address ongoing problems with online 
negative option marketing, ROSCA contains general provisions related to 
disclosures, consent, and cancellation.\9\ ROSCA prohibits charging or 
attempting to charge consumers for goods or services sold on the 
internet through any negative option feature unless the marketer: (1) 
Clearly and conspicuously discloses all material terms of the 
transaction before obtaining the consumer's billing information; (2) 
obtains a consumer's express informed consent before charging the 
consumer's account; and (3) provides simple mechanisms for the consumer 
to stop recurring charges.\10\ ROSCA, however, provides no details 
regarding steps marketers must follow to comply with these provisions.
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    \9\ 15 U.S.C. 8401-8405.
    \10\ 15 U.S.C. 8403. ROSCA incorporates the definition of 
``negative option feature'' from the Commission's Telemarketing 
Sales Rule, 16 CFR 310.2(w).
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    ROSCA also addresses offers made by, or on behalf of, third-party 
sellers during, or immediately following, a transaction with an initial 
merchant.\11\ In connection with these offers, ROSCA prohibits post-
transaction, third-party sellers from charging or attempting to charge 
consumers unless the seller: (1) Before obtaining billing information, 
clearly and conspicuously discloses the offer's material terms; and (2) 
receives the consumer's express informed consent by obtaining the 
consumer's name, address, contact information, as well as the full 
account number to be charged, and requiring the consumer to perform an 
additional affirmative action indicating consent.\12\ ROSCA also 
prohibits initial merchants from disclosing billing information to any 
post-transaction third-party seller for use in any internet-based sale 
of goods or services.\13\
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    \11\ ROSCA defines ``post-transaction third-party seller'' as a 
person other than the initial merchant who sells any good or service 
on the internet and solicits the purchase on the internet through an 
initial merchant after the consumer has initiated a transaction with 
the initial merchant. 15 U.S.C. 8402(d)(2).
    \12\ 15 U.S.C. 8402(a).
    \13\ 15 U.S.C. 8402(b).
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    ROSCA provides that a violation of that Act shall be treated as a 
violation of a Commission trade regulation rule under Section 18 of the 
FTC Act.\14\ Thus, the Commission may seek a variety of remedies for 
violations of ROSCA, including civil penalties under Section 5(m)(1)(A) 
of the FTC Act; \15\ injunctive and equitable monetary relief under 
Section 13(b) of the FTC Act; \16\ and consumer redress, damages, and 
other relief under Section 19 of the FTC Act.\17\ Although Congress 
charged the Commission with enforcing ROSCA, it did not specifically 
direct the FTC to promulgate implementing regulations.\18\
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    \14\ 15 U.S.C. 8404. Section 18 of the FTC Act is 15 U.S.C. 57a.
    \15\ 15 U.S.C. 45(m)(1)(A).
    \16\ 15 U.S.C. 53(b).
    \17\ 15 U.S.C. 57b(a)(1) and (b).
    \18\ ROSCA states that a violation ``of this chapter or any 
regulation prescribed under this chapter shall be treated as a 
violation of a rule under section 18 of the Federal Trade Commission 
Act (15 U.S.C. 57a) regarding unfair or deceptive acts or practices. 
15 U.S.C. 8404(a).
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C. Telemarketing Sales Rule

    The Telemarketing Sales Rule (``TSR'') (16 CFR part 310) prohibits 
deceptive telemarketing acts or practices, including those involving 
negative option offers, and certain types of payment methods common in 
deceptive marketing. The TSR only applies to negative option offers 
made over the telephone. Specifically, the TSR requires that 
telemarketers disclose all material terms and conditions of the 
negative option feature, including the need for affirmative consumer 
action to avoid the charges, the date (or dates) the charges will be 
submitted for payment, and the specific steps the customer must take to 
avoid the charges. It also prohibits telemarketers from misrepresenting 
such information and contains specific requirements related to payment 
authorization.\19\ The Commission recently amended the TSR to prohibit 
the use of payment methods often used in deceptive marketing, including 
negative options, such as remotely created checks.\20\
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    \19\ 16 CFR 310.3(a).
    \20\ 80 FR 77520 (Dec. 14, 2015). The TSR Notice of Proposed 
Rulemaking (78 FR 41200 (July 9, 2013)) noted negative option cases 
where the defendants used unauthorized remotely created checks. 
E.g., FTC v. FTN Promotions, Inc., Civ. No. 8:07-1279 (M.D. Fla. 
Dec. 30, 2008) (Stip. Perm. Inj.) (defendants allegedly caused more 
than $171 million in unauthorized charges to consumers' accounts for 
bogus travel and buyers' clubs in part by using unauthorized 
remotely created checks).
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D. Other Relevant Requirements

    The Electronic Fund Transfer Act (``EFTA'') \21\ and the Postal 
Reorganization Act (``PRA'') (i.e., Unordered Merchandise Statute) also 
contain provisions that address negative option marketing.\22\ EFTA 
prohibits sellers from imposing recurring charges on a consumer's debit 
cards or bank accounts without written

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authorization.\23\ The PRA provides that mailing unordered merchandise, 
or a bill for such merchandise, constitutes an unfair method of 
competition and an unfair trade practice in violation of Section 5 of 
the FTC Act.\24\
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    \21\ 15 U.S.C. 1693-1693r.
    \22\ 39 U.S.C. 3009.
    \23\ EFTA provides that the Commission shall enforce its 
requirements, except to the extent that enforcement is specifically 
committed to some other federal government agency, and that a 
violation of any of its requirements shall be deemed a violation of 
the FTC Act. Accordingly, the Commission has authority to seek the 
same injunctive and monetary equitable relief for EFTA violations 
that it can seek for other Section 5 violations.
    \24\ The Commission has authority to seek the same remedies for 
PRA violations that it can seek for other Section 5 violations. For 
example, the Commission can seek civil penalties pursuant to Section 
5(m)(1)(B) of the FTC Act from violators who have actual knowledge 
that the Commission has found mailing unordered merchandise unfair.
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V. Limitations of Existing Regulatory Requirements

    The existing patchwork of laws and regulations does not provide 
industry and consumers with a consistent legal framework across 
different media and types of plans. For instance, as discussed above, 
the current Rule does not cover common practices such as continuity 
plans, automatic renewals, and trial conversions.\25\ In addition, 
ROSCA and the TSR do not address negative option plans in all media--
ROSCA's general statutory prohibitions on deceptive negative option 
marketing only apply to internet sales, and the TSR's more specific 
provisions only apply to telemarketing. Furthermore, harmful negative 
option practices that fall outside of ROSCA and the TSR's coverage 
still occur.\26\ Therefore, under the current framework, different 
rules apply depending on whether a negative option offer is made 
online, over the phone, or in some other medium (e.g., in print, 
through the mail, etc.).
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    \25\ Indeed, the prenotification plans covered by the Rule 
represent only a small fraction of negative option marketing. In 
2017, for instance, the Commission estimated that fewer than 100 
sellers (``clubs'') were subject to the current Rule's requirements. 
82 FR 38907, 38908 (Aug. 16, 2017).
    \26\ For instance, the Commission recently brought two cases 
under Section 5 involving negative option plans that did not involve 
either internet sales or telemarketing. FTC and State of Maine v. 
Health Research Laboratories, LLC, No. 2:17-cv-00467-JDL (D. Me. 
2018); and FTC and State of Maine v. Marketing Architects, No. 2:18-
cv-00050 (D. Me. 2018).
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    Additionally, the current framework does not provide clarity about 
how to avoid deceptive negative option disclosures and procedures. For 
example, ROSCA lacks specificity about cancellation procedures and the 
placement, content, and timing of cancellation-related disclosures. 
Instead, the statute requires marketers to provide a ``simple 
mechanism'' for the consumer to stop recurring charges, but does not 
specify what methods would satisfy this requirement.

VI. Past FTC Rulemaking Efforts

    The Commission initiated its last regulatory review of the Negative 
Option Rule in 2009 (74 FR 22720 (May 14, 2009)), following a 2007 FTC 
workshop and subsequent Staff Report.\27\ The Commission completed the 
review in 2014 (79 FR 44271 (July 31, 2014)). At the time, the 
Commission found the comments supporting the Rule's expansion ``argue 
convincingly that unfair, deceptive, and otherwise problematic negative 
option marketing practices continue to cause substantial consumer 
injury, despite determined enforcement efforts by the Commission and 
other law enforcement agencies.'' \28\ It also noted that practices not 
covered by the Rule (e.g., trial conversions and continuity plans) 
accounted for most of its enforcement activity in this area. Despite 
these findings, the Commission declined to expand or enhance the Rule, 
concluding that amendments were not warranted because the enforcement 
tools provided by the TSR and, especially, ROSCA, which had only 
recently become effective, might prove adequate to address the 
persistent problems generated by deceptive and unfair negative option 
marketing. However, the Commission also explained that, if ROSCA and 
its other enforcement tools do not adequately protect consumers, the 
Commission could consider, based on a more complete record, whether and 
how to amend the Rule.\29\
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    \27\ See Negative Options: A Report By the Staff of the FTC's 
Division of Enforcement 26-29, https://www.ftc.gov/sites/default/files/documents/reports/negative-options-federal-trade-commission-workshop-analyzing-negative-option-marketing-report-staff/p064202negativeoptionreport.pdf.
    \28\ The Commission cited a number of its law enforcement 
actions challenging negative option marketing practices, including, 
for example, FTC v. Process America, Inc., No. 14-0386-PSG-VBKx 
(C.D. Cal. 2014) (processing of unauthorized charges relating to 
negative option marketing); FTC v. Willms, No 2:11-cv-00828 (W.D. 
Wash. 2011) (internet free trials and continuity plans); FTC v. 
Moneymaker, No. 2:11-cv-00461-JCM-RJJ (D. Nev. 2012) (internet trial 
offers and continuity programs); FTC v. Johnson, No. 2:10-cv-02203-
RLH-GWF (D. Nev. 2010), (internet trial offers); and FTC v. John 
Beck Amazing Profits, LLC, No. 2:09-cv-04719 (C.D. Cal. 2009) 
(infomercial and telemarketing trial offers and continuity 
programs); see also ``An Overview of the FTC's Enforcement Actions 
Concerning Negative Option Marketing,'' a presentation delivered 
during the Commission's 2007 ``Negative Options: An FTC Workshop 
Analyzing Negative Option Marketing,'' https://www.ftc.gov/news-events/events-calendar/2007/01/negative-options-workshop-analyzing-negative-option-marketing.
    \29\ 79 FR at 44276.
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VII. Ongoing Problems With Negative Option Marketing

    Since the conclusion of the last regulatory review of the Negative 
Option Rule, evidence strongly suggests that negative option marketing 
continues to harm consumers. The Commission and the states continue to 
regularly bring cases challenging negative option practices, including 
more than 20 recent FTC cases. These matters involved a range of 
deceptive and unfair practices, including inadequate disclosures for 
``free'' offers and other products or programs, enrollment without 
consumer consent, and inadequate or overly burdensome cancellation and 
refund procedures.\30\ In addition, the Commission continues to receive 
thousands of complaints each year related to negative option marketing. 
The recent cases and the high volume of ongoing complaints suggests 
there is prevalent, unabated consumer harm in the marketplace. As 
discussed below, the Commission seeks comments on these issues.
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    \30\ Examples of these matters include: FTC v. Credit Bureau 
Center, LLC, No. 17-cv-00194 (N.D. Ill. 2018); FTC v. JDI Dating, 
Ltd., No. 1:14-cv-08400 (N.D. Ill. 2018); FTC, State of Illinois, 
and State of Ohio v. One Technologies, LP, No. 3:14-cv-05066 (N.D. 
Cal. 2014); FTC v. Health Formulas, LLC, No. 2:14-cv-01649-RFB-GWF 
(D. Nev. 2016); FTC v. Nutraclick LLC, No. 2:16-cv-06819-DMG (C.D. 
Cal. 2016); FTC v. XXL Impressions, No. 1:17-cv-00067-NT (D. Me. 
2018); FTC v. AAFE Products Corporation, NO. 3:17-cv-00575 (S.D. 
Cal. 2017); FTC v. Pact Inc., No. 2:17-cv-1429 (W.D. Wash. 2017); 
FTC v. Tarr, No. 3:17-cv-02024-LAB-KSC (S.D. Cal. 2017); FTC v. 
AdoreMe, Inc., No. 1:17-cv-09083 (S.D.N.Y 2017); FTC v. 
DOTAuthority.com, Inc., No. 0:16-cv-62186-WJZ (S.D. Fla. 2018); FTC 
v. Bunzai Media Group, Inc., No. CV15-04527-GW(PLAx) (C.D. Cal. 
2018); and FTC v. RevMountain, LLC, No. 2:17-cv-02000-APG-GWF (D. 
Nev. 2018).
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VIII. Request for Comments

    The Commission seeks comments on the current Rule as well as 
possible regulatory measures to reduce consumer harm created by 
deceptive or unfair negative option marketing. In considering ways to 
meet this objective, as detailed below, the Commission seeks comment on 
various alternatives, including amendments to existing rules to further 
address disclosures, consumer consent, and cancellation. In particular, 
the Commission requests input on whether and how it should use its 
authority under Section 18 of the FTC Act to expand the Negative Option 
Rule to address prevalent unfair or deceptive practices involving 
negative option marketing.\31\ It also seeks comment on

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other approaches, such as the publication of additional consumer and 
business education. The Commission seeks any suggestions or alternative 
methods for improving current requirements. In their replies, 
commenters should provide any available evidence and data that supports 
their position, such as empirical data, consumer perception studies, 
and consumer complaints.
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    \31\ Section 202 of the Magnuson-Moss Warranty-FTC Improvements 
Act authorizes the Commission to promulgate rules that define with 
specificity acts or practices in or affecting commerce which are 
unfair or deceptive. FTC Act Section 18(a)(1)(B) (15 U.S.C. 
57a(a)(1)(B)). Under FTC Act Section 18(b)(3), the Commission may 
issue regulations ``where it has reason to believe that the unfair 
or deceptive acts or practices which are the subject of the proposed 
rulemaking are prevalent.'' The Commission may make such a 
prevalence finding if it has issued cease and desist orders 
regarding such acts or practices, or any other available information 
indicates a widespread pattern of unfair or deceptive acts or 
practices. Rules under Section 18 ``may include requirements 
prescribed for the purpose of preventing such acts or practices.''
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General Questions About the Current Rule

    (1) Is there a continuing need for the Rule as currently 
promulgated? Why or why not?
    (2) What benefits has the Rule provided to consumers? What evidence 
supports the asserted benefits?
    (3) What modifications, if any, should the Commission make to the 
Rule to increase its benefits to consumers?
    (a) What evidence supports your proposed modifications?
    (b) How would these modifications affect the costs and benefits of 
the Rule for consumers?
    (c) How would these modifications affect the costs and benefits of 
the Rule for businesses, particularly small businesses?
    (4) What, if any, impact has the Rule had on the flow of truthful 
information to consumers and on the flow of deceptive information to 
consumers? What evidence supports the asserted impact?
    (5) What, if any, significant costs has the Rule imposed on 
consumers? What evidence supports the asserted costs?
    (6) Are any of the Rule's requirements no longer needed? If so, 
explain. Please provide supporting evidence.
    (7) What benefits, if any, has the Rule provided to businesses, and 
in particular to small businesses? What evidence supports the asserted 
benefits?
    (8) What modifications, if any, should the Commission make to the 
Rule to increase its benefits to businesses, particularly small 
businesses?
    (a) What evidence supports your proposed modifications?
    (b) How would these modifications affect the costs and benefits of 
the Rule for consumers?
    (c) How would these modifications affect the costs and benefits of 
the Rule for businesses?
    (9) What, if any, significant costs, including costs of compliance, 
has the Rule imposed on businesses, particularly small businesses? What 
evidence supports the asserted costs?
    (10) What modifications, if any, should the Commission make to the 
Rule to reduce the costs imposed on businesses, particularly small 
businesses?
    (11) Should the Rule define ``clearly and conspicuously,'' given 
that it requires marketers to make certain disclosures clearly and 
conspicuously? If so, why, and how? If not, why not?
    (12) What evidence is available concerning the degree of compliance 
with the Rule? Does this evidence indicate that the Commission should 
modify the Rule? If so, why, and how? If not, why not?
    (13) Does the Rule overlap or conflict with other federal, state, 
or local laws or regulations? If so, how? Should the Rule be modified 
to address any such overlaps or conflicts? If so, why, and how? If not, 
why not? Please provide supporting evidence.

Questions About Negative Option Practices and the Existing Legal 
Framework

    (14) How widespread is the marketing of products or services 
through negative option plans, including, but not limited to, plans 
covered by the current Rule? What percentage of these negative option 
plans are offered through the internet, telemarketing, the mail, or 
through some other means? What data sources did you rely upon in 
formulating your answer?
    (15) Are there potentially unfair or deceptive practices concerning 
the marketing of negative option plans, not covered by the Rule, 
occurring in the marketplace? If so, what types of negative option 
plans does such marketing involve? What evidence, such as empirical 
data, consumer perception studies, or consumer complaints, demonstrates 
whether there is widespread existence of such practices? Please provide 
this evidence.
    (16) Does current marketing of negative option plans cause consumer 
injury? If so, what evidence demonstrates that such practices cause 
consumer injury do so? Please provide this evidence.
    (17) Please provide any evidence that has become available over the 
last several years concerning consumer perception of, or experience 
with, negative option offers, including offers for prenotification 
negative option plans, continuity plans, trial conversions, or 
automatic renewals.
    (18) How do the existing laws and regulations covering negative 
options affect consumers? What evidence supports your answer?
    (19) Do existing laws and regulations covering negative options 
affect businesses, particularly small businesses? If so, how? What 
evidence supports your answer?
    (20) Is there a need for new regulatory provisions to prevent 
deception by addressing negative option plans not covered by the Rule? 
If yes, why? If no, why not? If new regulations are needed to address 
the marketing of negative option plans not covered by the existing 
Rule, should the Rule be amended, or should a new Rule or Rules be 
created? Should all forms of negative option marketing be addressed in 
a single Rule or by new, separate Rules? What evidence supports your 
answer? What are the benefits and costs to consumers and businesses 
under either approach? What evidence supports your answer?
    (21) If new regulatory provisions are necessary, should they treat 
various types of negative option marketing differently? Why or why not? 
Would there be any adverse consequences if different forms of negative 
option marketing were addressed under separate Rules? Why or why not? 
What, if any, evidence supports your answer?
    (22) What specific modifications, if any, should be added to the 
Rule to better address prenotification negative option marketing, 
continuity plans, trial conversions, and/or automatic renewals? What 
evidence supports your proposed modification?
    (23) Do current or impending changes in technology or market 
practices affect whether and how the Rule should be modified? If so, 
what are such changes and how do they affect whether the Rule should be 
modified?
    (24) Are there foreign or international laws, regulations, or 
standards addressing negative option plans that the Commission should 
consider as it reviews the Rule? If so, what are they? Should the 
Commission consider adopting, or avoiding, any of these? If so, why? If 
not, why not?
    (a) Should the Rule be modified to harmonize with these 
international laws, regulations, or standards? If so, why, and how? If 
not, why not?
    (b) How would such harmonization affect the costs and benefits of 
the Rule for consumers and businesses, particularly small businesses?
    (25) Should the Commission consider additional consumer and 
business education to reduce consumer harm associated with negative 
option

[[Page 52398]]

marketing? If so, what should such education materials include, and how 
should the Commission communicate that information to consumers and 
businesses?

IX. Comment Submissions

    You can file a comment online or on paper. For the FTC to consider 
your comment, we must receive it on or before December 2, 2019. Write 
``Negative Option Rule (16 CFR part 425) (Project No. P064202)'' on 
your comment. Postal mail addressed to the Commission is subject to 
delay due to heightened security screening. As a result, we encourage 
you to submit your comments online, or to send them to the Commission 
by courier or overnight service. To make sure that the Commission 
considers your online comment, you must file it through the https://www.regulations.gov website by following the instructions on the web-
based form provided. Your comment--including your name and your state--
will be placed on the public record of this proceeding, including the 
https://www.regulations.gov website. As a matter of discretion, the 
Commission tries to remove individuals' home contact information from 
comments before placing them on the regulations.gov site.
    If you file your comment on paper, write ``Negative Option Rule (16 
CFR part 425) (Project No. P064202)'' on your comment and on the 
envelope, and mail it to the following address: Federal Trade 
Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Suite 
CC-5610 (Annex J), Washington, DC 20580, or deliver your comment to the 
following address: Federal Trade Commission, Office of the Secretary, 
Constitution Center, 400 7th Street SW, 5th Floor, Suite 5610 (Annex 
J), Washington, DC 20024. If possible, submit your paper comment to the 
Commission by courier or overnight service.
    Because your comment will be placed on the publicly accessible 
website at www.regulations.gov, you are solely responsible for making 
sure that your comment does not include any sensitive or confidential 
information. In particular, your comment should not include any 
sensitive personal information, such as your or anyone else's Social 
Security number; date of birth; driver's license number or other state 
identification number, or foreign country equivalent; passport number; 
financial account number; or credit or debit card number. You are also 
solely responsible for making sure that your comment does not include 
any sensitive health information, such as medical records or other 
individually identifiable health information. In addition, your comment 
should not include any ``trade secret or any commercial or financial 
information which . . . is privileged or confidential''--as provided by 
Section 6(f) of the FTC Act, 15 U.S.C. 46(f), and FTC Rule 4.10(a)(2), 
16 CFR 4.10(a)(2)--including in particular competitively sensitive 
information such as costs, sales statistics, inventories, formulas, 
patterns, devices, manufacturing processes, or customer names.
    Comments containing material for which confidential treatment is 
requested must be filed in paper form, must be clearly labeled 
``Confidential,'' and must comply with FTC Rule 4.9(c). In particular, 
the written request for confidential treatment that accompanies the 
comment must include the factual and legal basis for the request, and 
must identify the specific portions of the comment to be withheld from 
the public record. See FTC Rule 4.9(c). Your comment will be kept 
confidential only if the General Counsel grants your request in 
accordance with the law and the public interest. Once your comment has 
been posted publicly at www.regulations.gov, we cannot redact or remove 
your comment unless you submit a confidentiality request that meets the 
requirements for such treatment under FTC Rule 4.9(c), and the General 
Counsel grants that request.
    The FTC Act and other laws that the Commission administers permit 
the collection of public comments to consider and use in this 
proceeding as appropriate. The Commission will consider all timely and 
responsive public comments that it receives on or before December 2, 
2019. For information on the Commission's privacy policy, including 
routine uses permitted by the Privacy Act, see https://www.ftc.gov/site-information/privacy-policy.

    By direction of the Commission.
April J. Tabor,
Acting Secretary.
[FR Doc. 2019-21265 Filed 10-1-19; 8:45 am]
BILLING CODE 6750-01-P