Electronic Retailer - July 2012 - 13

INDUSTRY REPORTS

FTC Forum

W
BY LESLEY FAIR

Undisclosed Negative Options Draw Negative Attention from the FTC
When advertisers don’t take care to clearly and conspicuously disclose the details of the deal up front, it’s tough to say much positive about negative options. The FTC’s law enforcement action against the people behind the “Green Millionaire” promotion underscores that point. Regardless of whether a consumer’s primary interest is saving the earth or saving a buck, ads for the Green Millionaire book made attention-grabbing claims: “How to get free gas for life,” “How to put solar panels on your roof for free,” “How to make your electricity meter go backwards paying you.” How much did the book cost? According to the FTC, statements like “Now it’s FREE,” “FREE!,” and “This free offer won’t last” led reasonable consumers to conclude that the book was, well, free. The FTC says the defendants didn’t disclose (or didn’t disclose adequately) that people who ordered the “free” book would be enrolled in a negative option program subscribing them to an e-magazine and billing their credit cards a recurring charge for “membership” unless they canceled during a trial period, which was typically 14 days. What about promises that the book would show readers how to get free gas for life, install solar panels at no charge, or get their electric meter to “run backwards paying you”? Those claims were false, said the FTC. To settle the lawsuit, the defendants agreed to pay almost $2 million in refunds and are barred from making misleading product claims. For future written negative option offers, including online, the order requires them to provide a check box disclosing important terms of the program, including all costs associated with it, that consumers are agreeing to pay the costs, the length of any trial period, and that people must cancel to avoid the charges. Consumers must then affirmatively select the check box for the defendants to process any billing information. What pointers can companies take from a closer reading of that case? • Free means free. Whether you’re touting the cost-saving benefits of your product or what people will have to pay

for it, don’t say “free” if you don’t mean “free.” It’s really that simple. • Silence isn’t golden. It should go without saying, but we’ll say it anyway: Don’t charge a customer’s credit card without their express approval. Assuming that a person’s silence or inaction gives you permission to charge them – or promoting a product as “free” and then burying the particulars about billing – is a sure-fire way to tick off customers, draw law enforcement scrutiny, and invite attention from card issuers. • “Check” the box. The terms of FTC settlements apply just to those companies, but savvy marketers know how to spot compliance nuggets in FTC orders. The order in the Green Millionaire case outlines in detail what those companies have to do in the future to disclose key components of any negative option they offer. How would your own promotions measure up? • B(u)y the book? There’s a myth that selling a book is an end-run around the FTC Act. Not so — and the FTC’s 2009 rescission of its often-misstated Mirror Image Doctrine makes that point crystal clear. Lesley Fair is an attorney with the FTC’s Bureau of Consumer Protection.

Whether you’re touting the cost-saving benefits of your product or what people will have to pay for it, don’t say “free” if you don’t mean “free.” It’s really that simple.

July 2012 | electronicRETAILER

Electronic Retailer - July 2012

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