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TALLAHASSEE, FL – Attorney General Bill McCollum has provided comments to the Federal Trade Commission (FTC) concerning whether the FTC should amend its rule on "negative option" plans. The Attorney General’s Office has aggressively pursued numerous cases involving unfair or deceptive negative option plans, and Attorney General McCollum’s comments advocate for better consumer protection measures to expand the existing FTC rule.

"Consumers deserve the best measures of consumer protection we can provide," said Attorney General McCollum.

A negative option plan is a sales practice in which goods or services are provided automatically to the consumer unless the consumer notifies the business in advance of the shipment or billing that he or she does not want the goods or services. Negative option plans have traditionally been used by businesses such as book clubs, record clubs, and mail-order merchandisers; more recently, the use of negative option plans has expanded to include a wide variety of products and services being offered in almost every sales medium, including retail, internet, television, radio, direct mail and print advertisements. In recent years, Attorney General McCollum’s Economic Crimes Division has pursued noteworthy negative options cases involving cell phone content, magazine subscriptions, and internet marketing schemes.

The most common type of negative option plan today is the trial conversion, in which a consumer receives a product or service for a trial period and is billed if the product or service is not returned or cancelled. Often, these plans convert to an automatic renewal or continuity plan where the consumer continues to receive additional shipments or services unless the consumer cancels. Problems may occur when consumers are billed or charged for products they did not intend to order or did not want to receive on a continuing basis.

The existing FTC rule regulates only one type of negative option called a "pre-notification negative option plan," where consumers receive periodic announcements that merchandise will be delivered to them unless they decline to accept it within a set period of time. The Attorney General’s Office has investigated nearly 50 companies for marketing and billing negative option plans since 1998. Only two of those investigations involved negative option plans which would have been subject to the existing FTC rule.

The FTC sought public comment on whether the rule should be changed or broadened to apply to other forms of negative option plans. The comments submitted by Attorney General McCollum support retention of the existing rule, but with some important changes. The Attorney General advocated expanding the rule to cover other variations of negative options, notably offers that transition from free offers to paid subscriptions and automatic renewals, and to apply to all business entities that offer of negative option plans.

The Attorney General’s comments also emphasized that the FTC rule should require businesses to obtain consumers’ express, informed consent to the material terms of the offer; require companies to provide clear and conspicuous disclosure of the material terms at the point of sale and in confirmation notices following the sale; expand the right to cancel and require adherence to cancellation policies; tighten regulation of third-party billing mechanisms; and ensure that negative option contracts are not marketed to minors.

A copy of the Attorney General’s comments is available online at: http://myfloridalegal.com/webfiles.nsf/WF/MRAY-7WTNJD/$file/FTCNegativeOptionsLetter.pdf