The US Federal Trade Commission (FTC) is considering whether to make it easier for folks to cancel deliveries and subscription services. People should be able to simply click on a page or in an app to exit a subscription, and not have to go through a maze of bureaucracy, it’s suggested.
Now, in official filings, industry groups are claiming people would be bewildered by such convenience and transparency.
California and New York already have rules governing “negative option marketing” – inferring consumer consent to start or continue billing for a service when no action is actually taken.
The FTC has proposed a Negative Option Rule to make more demands of businesses that take inaction as agreement.
“Businesses marketing negative option products and services must clearly and conspicuously disclose key material terms – including when any trial period ends, the deadline to cancel, the frequency of charges, the date of payments, and cancellation information – before collecting any billing information from the customer,” said FTC Chair Lina Khan, Commissioner Rebecca Kelly Slaughter, and Commissioner Alvaro M. Bedoya in a joint statement [PDF] announcing the process.
The FTC proposal would also require that businesses get people’s unambiguous affirmative consent – apart from any other agreement – for a negative option feature in a transaction (e.g. a subscription).
So the trade watchdog put out a call for “real comments from real people” – perhaps a nod to the fake comments submitted to the Federal Communications Commission over net neutrality – about the rules being considered, which call for a simple “click-to-cancel” mechanism among other consumer protections.
Industry lobbying groups were quick to weigh in during the public comment period. And they really don’t like the idea of regulating free trials, auto renewals, and subscriptions.
‘Burden’
The Internet & Television Association (NCTA), the principal trade group for the cable industry (which began as the National Cable & Telecommunications Association), believes subscribers would be overhelmed by the proposed consumer protections.
The NCTA said it is concerned “that rather than benefiting consumers and introducing greater clarity to the market, the overly broad proposed rule will have unintended consequences that would burden, confuse, and harm consumers, and would prohibit Members from providing consumers with key information that could inform their decisions about whether to modify or cancel their services.”
The group said the proposed rule unfairly treats automatic renewals, continuity plans, and trial offers as “negative plan options,” that are presumptively unfair and deceptive. And it argued the FTC lacks the authority to take such broad action using powers specifically tailored to address unfair practices and deception. It even floated the possibility of a challenge based on companies’ First Amendment free speech rights untrammleled by government.
Requiring ‘simple’ cancellation is a difficult standard for businesses to implement
The Association of National Advertisers (ANA), the largest US ad trade group, opposes the click-to-cancel requirement based on the notion consumers would unwittingly cancel services, because, amazingly enough, they would never believe cancellation could occur with just one click.
“Requiring ‘simple’ cancellation is a difficult standard for businesses to implement, as there is little detail provided to guide them to understand its meaning and how to comply with this ambiguous requirement,” the ANA explained in its comments. “If sellers are required to enable cancellation through a single click or action by the consumer, accidental cancellations will become much more common, as consumers will not reasonably expect to remove their recurring goods or services with just one click.”
The ANA, ever mindful of the limits of netizens’ mental capacity, goes on to argue that the proposed requirements to disclose charges in greater detail would just be confusing to people.
“A requirement to make such excessive disclosures could, in fact, cause more confusion by bombarding consumers with information and so many different aspects of the negative option feature at a time when the consumer has already decided to purchase the feature and is preparing to supply billing information to the seller,” the ANA said. “This requirement could also result in disclosure fatigue and undermine consumers’ understanding of and attention to the disclosures.”
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The Consumer Technology Association (CTA), North America’s largest technology trade group, shares the ANA’s concern that the FTC’s proposed rule will “increase compliance costs and consumer confusion.”
Noting that the FTC already prohibits deceptive behavior, the CTA said the “unnecessarily specific” language might “deter companies from offering recurring subscriptions in certain circumstances, and consumers may be forced to give consent to new terms for the same goods and services numerous times, resulting in consent fatigue.”
And the News/Media Alliance (N/MA), a trade group representing news media and publishers in the US, says that that publications have come to depend on automatic subscription renewals.
“A reduction in the number of automatic renewal subscriptions would translate into higher costs for N/MA’s members, which could eventually mean consumers would pay more for periodicals,” the N/MA said.
The proposed rules “will likely cause consumer and industry confusion,” the publishing group said.
Checking boxes? That’s too much
And the Performance Driven Marketing Institute (PDMI), which represents 130 firms involved in performance and direct-to-consumer marketing, also feels that the FTC proposal would bewilder people. It’s particularly concerned about the requirement to “obtain the consumer’s unambiguously affirmative consent to the negative option feature offer separately from any other portion of the transaction.”
“Requiring an additional check box may actually be an impediment to consumers who legitimately want to purchase the products or services being offered,” the PDMI said. “Without understanding why they are being asked to check another box, consumers may either not check the boxes or abandon the purchase altogether due to confusion.”
Outside industry trade groups, the response to the rule proposal has been more enthusiastic. A group of eight law professors expressed support for the would-be rules and for additional consumer protection.
Businesses like subscriptions because subscriptions help make revenue more predictable and constant
“Some industry participants claim that these state actions either create an unmanageable patchwork of different requirements, or demonstrate that no further regulation is needed,” the academics said. “In reality, however, this ongoing engagement just shows that unscrupulous negative-option business models remain such a problem that states increasingly find themselves needing to step in.”
Chris Hoffnagle, professor of law at UC Berkeley, also endorsed the rule proposal.
“Businesses like subscriptions because subscriptions help make revenue more predictable and constant. This reduces uncertainty for the business and reduces risk. This sounds good until one understands the context: the risk and uncertainty reduced is competitive risk—the challenge of competing on quality and price,” he wrote.
“Many negative option strategies are monopoly strategies. They seek to lock in consumers into a relationship where the seller can increase prices uneconomically. Consultants in the field even say that subscriptions give companies predictable and constant revenue – the hallmarks of monopoly.”
Among consumers who submitted comments, far more voices expressed support for FTC intervention than opposition. Perhaps they’re just confused. ®
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