Advertising Law Blog

On November 15, 2024, the Federal Trade Commission (“FTC”) published its amendments to its Negative Option Rule, retitled as the Rule Concerning Recurring Subscriptions and Other Negative Option Programs (the “Final Rule”) in the Federal Register.

Our analysis of the Final Rule published in the New York Law Journal can be found here. The Final Rule is currently the subject of several lawsuits attempting to prevent the Final Rule from going into effect. Unless such attempts are successful, parts of the Final Rule will go into effect on January 14, 2025, with the balance of the Final Rule slated to go into effect on May 14, 2025. The specific provisions and their applicable effective dates are detailed below:

• Effective January 14, 2025: The Final Rule’s expansive prohibition against misrepresenting any material fact made while marketing using a negative option feature (16 C.F.R. § 425.3) will go into effect in January. This restriction is controversial because, as written, it expands the FTC’s penalty powers (currently in excess of $50K per violation), to what is typically a Section 5-type violation (in which currently no monetary relief is available). This could mean that any material misrepresentation (whether as part of the negative option offer or any other part of the offer) is subject to significant penalties.
• Effective May 14, 2025: Regulated entities have until May 2025 to come into compliance with the remaining substantive requirements, including “obtain[ing] a consumer’s express informed consent to the negative option feature before Charging the consumer” (16 C.F.R. § 425.5); and “provid[ing] a simple mechanism to cancel the Negative Option Feature; avoid being Charged, or Charged an increased amount, for the good or service; and immediately stop any recurring Charges.” (16 C.F.R. § 425.6).

We will continue to monitor the progress of the ongoing judicial challenges to the Final Rule. However, while simultaneously monitoring such challenges, businesses engaged in applicable marketing techniques should promptly move toward compliance with the Final Rule. In the meantime, marketers should be reviewing their enrollment and cancellation paths, as well as all other aspects of their offers that include a continuity offer.