Negative options – make them a positive
September 22, 2016
In a recent article, the Federal Trade Commission (“FTC”) highlighted the lessons businesses can learn from its settlement with NutraClick, a company that marketed nutritional supplements and beauty products. NutraClick offered "free" samples of its products but failed to adequately inform consumers that accepting these samples enrolled them in a negative option program, resulting in monthly charges between $29.99 and $79.99. This type of offer, where consumers receive regular shipments until they cancel, is known as a negative option continuity plan.
The FTC's complaint against NutraClick pointed to violations of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA), specifically due to insufficient disclosure of material terms and the lack of express informed consent prior to charging consumers' credit cards. As part of the settlement, NutraClick is prohibited from advertising samples as free if accepting them triggers a payment plan. The company must also clearly disclose charges, trial periods, and cancellation procedures, and it will pay $350,000 as part of the agreement.
The FTC advises businesses considering negative option programs to adhere to multiple laws, including the Negative Option Rule, the FTC Act, and ROSCA. While the Negative Option Rule applies specifically to prenotification plans where consumers are informed about upcoming shipments, other types of negative options still fall under the purview of the FTC Act and ROSCA. Businesses must ensure that they clearly disclose all material terms before obtaining billing information, secure express informed consent from consumers, and provide simple cancellation options to avoid violations. By following these guidelines, companies can create a more positive experience for consumers and mitigate the risk of deceptive marketing claims.
For more information, see here: https://www.ftc.gov/news-events/blogs/business-blog/2016/09/negative-options-make-them-positive
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