The FTC's recent announcement about its complaint against a B2B marketer shows the importance of adhering to the basic principles of disclosure and consent when engaging in negative option marketing, even in the business-to-business context.
The complaint alleges that American Future Systems, Inc. (AFS) charged businesses, schools, fire and police departments, and other non-profits, for books and newsletter subscriptions they never ordered. AFS marketed the subscriptions by phone, allegedly creating the impression that they were sending free samples with no obligation. In reality, according to the complaint, AFS enrolled the organizations into its subscription service on a negative option basis, that is, the organizations would incur charges unless they took steps to cancel the subscription. In addition, the complaint alleges, the invoices sent to the organizations included no information about how to cancel.
The organizations were billed for subscriptions they never ordered, and in many cases, never received. And when the organizations didn't pay, their accounts were turned over to collection agencies.
After years of these practices, the FTC sued, asserting charges under the FTC Act and the Unordered Merchandise Statute, the latter which prohibits sending unordered merchandise to consumers unless such merchandise is clearly and conspicuously marked as a free sample, or is sent by a charitable organization soliciting contributions. The statute also prohibits sending consumers dunning communications or bills for unordered merchandise.
Although the conduct alleged here is extreme, there are a couple of important lessons for legitimate marketers too:
Business-to-business marketing practices can and do attract regulatory attention. Even though the FTC did not assert charges under ROSCA in this case, the FTC Act itself provides ample ammunition when a marketer fails to engage in appropriate negative option marketing. Also, at a time when small businesses are struggling, it seems likely that regulators will do what they can to protect them too from unlawful or predatory business practices.
Also, legitimate negative option marketing is predicated on a few fundamental principles: the buyer must receive adequate disclosure of the terms, must affirmatively consent to those terms, and must have knowledge of -- and a true ability to take -- steps to cancel and prevent ongoing charges. Marketers neglect these principles at their peril.
Originally published 22 May 2020
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