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Congress Sets Sights on Recurring Revenue Marketing Model

 

“The Unsubscribe Act” was recently introduced in Congress.  It is designed to protect consumers from automatic monthly charges via marketing campaigns that fail to clearly and conspicuously disclose material terms prior to the entry of billing information.

Trial offers, automatic subscription renewals and continuity plans are prevalent in the dietary supplement industry.

Many marketers fail to adhere to FTC advertising law compliance requirements by, without limitation, properly disclosing all material terms, such as the length of any trial period, refund/cancellation policies, automatic renewal until cancellation, the amount of the charges, how the charges will appear, the timing/manner of charges, and shipping/handling charges.

The bill looks to the Restore Online Shopper’s Confidence Act as a foundation and contemplates the regulation of additional types of negative option programs.

The Unsubscribe Act proposed requirements for merchants to provide clear and conspicuous disclosures, up-front, and obtain affirmative consent from consumers before prior to the collection of any payment for additional products following a one-time purchase by a consumer or the conclusions of a free-trial period.

The Act would also require merchants to provide notification of all charges or account changes within thirty days before the end of the initial fixed period, and subsequently on a quarterly basis.

As proposed, available cancellation mechanisms must be provided in the same manner as the method consumers used to enroll.

Recurring revenue marketing models will continue to draw significant attention from regulatory agencies.  Interestingly, the bill provides for enforcement authority by the Federal Trade Commission and state Attorneys General.

This bill was assigned to a congressional committee on February 15, 2017, which will consider it before possibly sending it on to the House or Senate as a whole.

If you are the subject of a state Attorney General or FTC investigation or enforcement action, contact an FTC Defense Lawyer to ensure that your matter is handled properly and proactively, from the start.

The text of the bill can be seen, here.

Richard B. Newman is an Internet marketing compliance and regulatory defense attorney at       Hinch Newman LLP focusing on advertising and digital media matters. His practice includes conducting legal compliance reviews of advertising campaigns, representing clients in investigations and enforcement actions brought by the Federal Trade Commission and state Attorneys General, commercial litigation, advising clients on promotional marketing programs, and negotiating and drafting legal agreements. 

HINCH NEWMAN LLP. ADVERTISING MATERIAL. These materials are provided for informational purposes only and are not to be considered legal advice, nor do they create a lawyer-client relationship. No person should act or rely on any information in this article without seeking the advice of an attorney. Information on previous case results does not guarantee a similar future result.

 

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