By Lesley Fair

Everybody likes surprises – except when they arrive on the doorstep in the form of merchandise consumers didn’t order.  Negative option marketing – transactions in which sellers interpret a customer’s failure to take an affirmative step as an agreement to be charged for goods or services – offers convenience to consumers if the terms are clearly spelled out beforehand.  But that’s a big if.  According to Negative Options, a report by the staff of the Federal Trade Commission (FTC) available at business.ftc.gov, marketers who play fast and loose with the truth about negative option plans risk consumers’ ire and law enforcement headaches.

The report focused on four kinds of transactions.  In pre-notification negative option plans – book clubs, for example – consumers agree to get periodic notices offering a product.  If they take no action, sellers send the item and charge the recipient.  For continuity programs, buyers agree to receive periodic deliveries, which they’ll get until they cancel.  For automatic renewal plans – say, a magazine subscription – a seller continues a customer’s subscription until the customer cancels.  In free-to-pay conversions, for an initial period customers receive goods for free or at a nominal cost.  After that, sellers send merchandise and charge a fee until consumers affirmatively cancel.  

If you use negative option marketing, the staff report offers some points to consider:

• Use plain language to explain the terms of the offer.  An advertising slogan in ancient Sanskrit would be unthinkable to savvy marketers, and yet many negative option plans read just like that to potential customers.  It’s the marketer’s responsibility to explain the material terms – what buyers will get, the frequency of delivery, how much it’s going to cost, how to cancel, and whether the transaction involves the transfer of a consumer’s billing information to a third party – in a way consumers understand.  Vague, legalistic, or contradictory language won’t cut it.
• Design disclosures to be clear and conspicuous.  Advertisers are pros at creating eye-catching graphics to showcase their products.  Put those same skills to work to convey key terms in a way that grabs attention.  Place the terms of the deal where they’re going to be seen and label them to highlight their importance.
• Disclose the terms before customers pay or incur a financial obligation.  Consumers need the details of the deal before they say yes.  After-the-fact disclosures won’t do the trick.
• Get buyers’ affirmative consent.  To be sure consumers want to sign up for a negative option offer, set up the deal so they have to take an affirmative step to demonstrate their consent.  Don’t rely on a pre-checked box as evidence of approval.
• Don’t set up roadblocks that make it hard for customers to cancel.  Ignored email or endless waits on the phone leave customers with a poor impression of your company.  By setting up a straightforward system for handling cancellations, you’re leaving the door open for their business in the future.  

Lesley Fair is an attorney in the FTC’s Bureau of Consumer Protection.