Last Updated: Dec 01, 2024

2010: Subscription Regulation Begins With The Restore Online Shoppers' Confidence Act (ROSCA)?

ROSCA Regulates "Negative Option" Offers (Online Subscriptions)

The Restore Online Shoppers' Confidence Act (ROSCA) is a federal law enacted in 2010 that regulates online offers and sales of subscriptions.

Digital marketers often refer to subscriptions as "continuity income" and "recurring revenue" plans.

The FTC uses the term "negative option" plans for subscriptions.

Regardless of the term used, the essence of subscriptions is that a subscription service automatically renews at the end of each billing cycle unless the consumer takes affirmative action to cancel.

What are the ROSCA Requirements for Subscription Offers?

Under ROSCA, companies that offer automatic renewal or continuous service offers must clearly and conspicuously disclose the terms of the offer and obtain the consumer's express consent before charging their payment method. The disclosure must include the following:

    *  The material terms of the offer, including the length of the renewal term and the amount of any recurring charges.

    *  The fact that the subscription will automatically renew unless the consumer takes affirmative action to cancel.

    *  A simple and easy-to-use mechanism for canceling the subscription, such as an email address or toll-free phone number.

    *  If the offer includes a free trial period, the disclosure must also include the length of the trial, the fact that the consumer will be charged unless they cancel, and instructions on how to cancel.

FTC Enforcement of ROSCA Violations

The Federal Trade Commission (FTC) is responsible for enforcing ROSCA. The FTC has the authority to investigate and FTC enforcement actions against companies that violate ROSCA's requirements for subscription offers.

If the FTC finds that a marketer has violated ROSCA, FTC enforcement may include civil penalties (fines), injunctive relief, and other remedies.

The FTC may also require the marketer to provide refunds to consumers charged for goods or services without their consent or who did not receive adequate disclosures regarding the subscription offer.

2021: The FTC Adds "Dark Patterns" to Subscription Enforcement

FTC's New "Dark Pattern" Enforcement Policy

In 2021, the FTC introduced its new Enforcement Policy Statement Regarding Negative Option Marketing.

Samuel Levine, Director of the FTC's Bureau of Consumer Protection, stated:

“Today's enforcement policy statement makes clear that tricking consumers into signing up for subscription programs or trapping them when they try to cancel is against the law. Firms that deploy dark patterns and other dirty tricks should take notice."

The FTC doesn't have an official definition of "dark patterns." Samual Levine has used the term "dirty tricks."

Dark patterns generally refer to user interface (UX) design techniques that are intentionally used to manipulate or deceive users into taking actions they might not otherwise take, such as making a purchase, signing up for a service, or sharing personal information.

Examples of dark patterns from past FTC enforcement actions include the following.

    *  Obscuring important payment information behind hyperlinks, inconspicuous places, or hidden on pages other than the offer page.

    *  Making it difficult for consumers to cancel subscriptions by making them wait on hold or listen to a sales pitch before the cancellation was possible.

    *  Undisclosed conversions from a free trial to a paid subscription before the expiration of the free trial.

3 Key Requirements of the New FTC "Dark Patterns" Policy Statement

Subscription offers must satisfy three requirements to avoid FTC enforcement and potential civil penalties (fines). These three requirements are summarized below.

    1.  Disclosure. Disclose all material terms of the subscription offer clearly and conspicuously, including:

    *  Total cost,

    *  Deadlines for actions to stop further charges,

    *  Amount and frequency of charges,

    *  How to cancel,

    *  Product/service disclosures that are necessary to prevent consumer deception,

    *  Disclosures should be provided upfront when consumers first see the offer, and

    *  Disclosures should be as prominent as the subscription offer itself.

    2.  Consent. Get the consumers' express informed consent before charging.

    *  Acceptance should be separate from the entire transaction and not buried or hidden.

    *  There should be no disclaimers or other information that detracts from or contradicts the subscription offer.

    3. Cancellation. Provide an easy and simple way to cancel the subscription that is at least as simple as the method to purchase the subscription.

2022: How the FTC Used "Dark Patterns" in a $100 Million Settlement with Vonage

With its press release issued in November 2022, the FTC announced that Vonage would be required to pay $100 million for refunds to consumers who were harmed by Vonage's failure to make its cancellation process simple and easy.

The FTC complaint was based on a violation of ROSCA (among other claims).

The complaint also used the term "dark patterns" in its description of ways that Vonage made cancellation difficult. 

The FTC contrasted how Vonage provided numerous relatively easy ways to sign up to purchase with how the cancellation process was significantly more difficult.

Sam Levine commented: “Today, the FTC delivers on our commitment to protect consumers from illegal dark pattern tactics by companies that prevent consumers from canceling their services. This record-breaking settlement should remind companies that they must make cancellation easy or face serious legal consequences.”

The following is a summary of the "dark patterns" Vonage used to make cancellation more difficult.

    *  Cancellation only by speaking to a live “retention agent” on the phone;

    *  Made it difficult to find the cancelation phone number on the Vonage website;

    *  Difficulty in transferring calls from customer support to the “retention agent”;

    *  Reduced hours for cancellation; and

    *  Failing to provide promised callbacks.

Update, October 16, 2024: FTC Announces New Negative Option Rule Update for Subscriptions (Effective April 2025)

The FTC's Announcement

The FTC announced the new Rule on October 16, 2024, which updates the original 1973 Rule.

The official title of the new Rule is "Rule Concerning Recurring Subscriptions and Other Negative Option Programs" (the "Negative Option Rule").

FTC Resources:

• The FTC Announcement.
• The Federal Register Publication (full details).

How Does the New Rule Relate to ROSCA?

ROSCA remains in force and continues to govern negative option features specifically in online transactions. The Negative Option Rule is intended to work along side ROSCA rather than replace ROSCA.

The Negative Option Rule expands the reach of ROSCA. The Negative Option Rule:

• Applies to all forms of negative option marketing (not ust to online transactions); and
• Adds new consumer protections such as misrepresentation prohibitions and the "1 Click-to-Cancel" requirement

Summary of the Updates to the Negative Option Rule

The following is a summary of the FTC's proposed updates to the Negative Option Rule.

    *  Coverage: all negative option offers would be covered, including prenotification, recurring revenue and continuity plans, auto-renew plans, and free trial offers.

    *  Negative Option Offer Media: virtually all media, including the Internet, phone, in-person, and via print media.

    *  Disclosures: Before obtaining a consumer's billing information, the seller must disclose "clearly and conspicuously (i) that the payments will be recurring if applicable, (ii) the deadline by which consumers must act to stop charges, (iii) the amount or ranges of costs consumers may incur, (iv) the billing date, and (v) the cancellation method.

    *  Informed Consent: sellers must (i) obtain the consumer's unambiguously affirmative consent to the negative option, (ii) the consent must be separate from any other part of the offer, (iii) sellers must refrain from including any information that interferes with or detracts from the consumer's ability to provide informed consent; (iv) obtain the consumer's unambiguously affirmative consent to the entire transaction; and (v) maintain (for three years or a year after cancellation, whichever is longer) verification of the consumer's consent.

    *  Cancellation Options "1 Click to Cancel": sellers must provide a cancellation option through the same medium used to enroll, whether through the Internet, telephone, mail, or in-person. If a consumer enrolls online, then an option to cancel online must be provided (i.e., "1 Click to Cancel").

    *  Cancellation "Pitches" (also known as "Saves"): The FTC declined to include a "save" provision in the FTC Rule; however, the FTC Rule prohibits any information that "interferes with, detracts, from, contradicts, or otherwise undermines" a consumer's ability to provided informed consent.

    *  Cancellation Reminders: sellers shall provide an annual reminder to consumers consisting of the identity of the product or service, frequency and amount of charges, and how to cancel. The reminder requirement doesn't apply to physical goods.

    *  Material Misrepresentations: The FTC rule provides for enforcement actins base on any "material misrepresentation" of a material fact relating to the sale of subscription-based products or services.

Question: Does the FTC Rule Require You to Provide a Separate "Consent Checkbox" for Informed Consent?

This is a frequently asked question.

As stated above, the FTC Rule require unambiguous, affirmative consent to the subscription offer, which must be separate from any other part of the offer, and the subscription disclosures must appear "immediately adjacent to the means for recording the consumer's consent for the negative option feature."

Given the foregoing requirements, is a consent checkbox required?

The FTC says "no", a checkbox is not required.

The FTC Rule provides that a subscription seller will be "deemed in compliance" with the consent requirement if the seller obtains consent via one of the following methods, provided the consumer must affirmatively select or sign the subscription feature and no other part of the transaction:

    *  Checkbox,

    *  Signature, or

    *  Other substantially similar method for recording consent.

The FTC added the following option: "marketers are free to innovate as long as the meet the express informed consent standard."

So, what's the best practice? 

Given that the FTC stated that a checkbox for consent would be "deemed in compliance" and the fact that at least one state (Vermont) requires a checkbox, it appears that a checkbox would be the best practice.

A checkbox also makes sense, given the requirement that subscription disclosures must appear "immediately adjacent to the means for recording consent (it may be reasonably easy to satisfy this requirement with a checkbox).

Question: Do the Proposed Updates Require You to Provide a "One-Click to Cancel" Button?

This is another often-asked question.

The key to the answer is how the consumer signed up for the subscription offer.

The proposed updates are intended to make cancellation "as easy... as it was to sign up."

Subscription offers may be accepted by Internet, phone, mail, or in-person.

Typically online subscriptions are accepted by clicking a button, so these subscriptions would require cancellation by the same method, a one-click to-cancel button.

As stated above, related provisions require:

    *  Prior consumer consent if the subscription seller wants to engage in "pitches" to save the subscription, and

    *  Annual cancellation reminders for subscribers.

Summary

Negative-option sellers now face a virtual patchwork of laws regulating subscriptions, including;

    *  State auto-renew laws,

    *  ROSCA,

    *  The new FTC Negative Option rule, and

    *  The "Dark Patterns" enforcement policy.

How I Can Help You

I help digital marketers set up and update subscription offers and cancellation procedures that address federal and state requirements for subscription marketing compliance.

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• Juris Doctor Degree, Wake Forest University School of Law
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