TO CLICK-TO-CANCEL OR BE CANCELLED? IT’S NO LONGER A QUESTION.

On Wednesday, the Federal Trade Commission announced its new rule dubbed "click-to-cancel." It applies to "negative option marketing," which are transactions in which consumers are charged unless they take an affirmative action to prevent or stop the future payment (think automatic renewals, continuity plans, free-trial-to-paid-conversion-offers).

These are the four major requirements of the new rule. It:
1) Prohibits misrepresentations of any material fact made while marketing using a negative option feature (more on this below);
2) Requires sellers to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature (and these material terms need to be placed near the consent mechanism);
3) Requires sellers to obtain consumers’ express informed consent specifically to the negative option feature before charging the consumer;
4) Requires sellers to provide consumers with "simple" cancellation mechanisms to immediately halt all recurring charges.

Some important callouts here:
- B2B transactions are NOT exempt from the rule. Even if your clients are other companies, your company must still provide a cancellation mechanism that is at least as easy to use as the mechanism you used for signing them up, and it must be easy to find.
- Is your privacy policy updated? The ban on misrepresentations of fact is NOT limited to only those representations about the negative option feature, so all material facts disclosed at sign-up, including those in the Privacy Policy and Terms of Service, apply. (If there wasn't already good reason to not claim to do something in your privacy policy if you are not doing it or tell your customers you don't sell or share data when you do in fact sell to third parties, here it is!)
- No hurdles. Sellers cannot require consumers to talk to a live or virtual representative to cancel, if they were not required to do that when enrolling.
- Get consent and retain it for 3 years! With respect to obtaining express, informed consent, the FTC accepts the use of a check box, signature, or other substantially similar method, which the consumer must affirmatively select or sign to accept the negative option feature and no other portion of the transaction. The seller must keep or maintain verification of the consumer's consent for at least three years.
- Using a third party won’t save you. Finally, sellers are required to comply with the rule and its requirements around negative option marketing. If you are using a payment processor, which is merely facilitating the transaction, that does not get you around the rule! Same goes for if you are using a third-party service to manage enrollments. As the seller, you must still comply with the rule.

The rule will go into effect in a few weeks. This is a great time to analyze your marketing materials and sign-up/cancellation mechanisms. It’s also a great time to dust off your Privacy Policy and Terms of Service if you haven’t looked at them since founding your company; things might have changed (in fact, A LOT probably changed since then), so please take care to review any and all material representations you make when marketing a product or service with a negative option feature.

And, of course, if you’re too busy to review and analyze the 230-page-rule, which I hope you are, please contact us at info@ambartlaw.com.