Advertising Law Blog

The FTC has announced a January 25, 2007 workshop on marketing programs with negative option features. The workshop offers marketers an opportunity to learn the FTC’s current thinking on the technique and where the agency is likely heading and (hopefully) to have input on that direction. Workshops also tend to be a good indication that future regulatory activity is forthcoming.

What is a negative option offer? A negative option is when a consumer is offered a good or service on a continuing basis unless they act affirmatively to cancel. Frequently, negative options are combined with free to pay offers in which a consumer is given the ability to “test drive” the program for a defined period of time, and is thereafter billed, unless she notifies the company that she desires to cancel. Even though advance consent has presumably been obtained, because billing occurs if the consumer does not act by the end of a defined time period, negative option programs frequently generate regulatory scrutiny. Note - both the DMA and the ERA have enacted guidelines for programs that utilize advance consent options.

Negative option programs have garnered regulatory scrutiny over the years. Recently, the FTC announced the settlement of the Epixtar action or last summer's settlement with Scholastic.

Moreover, as recently reported on this blog, sixteen states announced a settlement with Chase and Trilegiant over those companies marketing of discount buying clubs. Clearly, this is a marketing technique that needs to be utilized carefully.

The workshop is designed to address the pros and cons of negative option offers, with what appears to be an emphasis of online marketing. An agenda and additional information on attendees will be posted here.