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Thompson Hine LLP, a full-service business law firm with approximately 400 lawyers in 8 offices, was ranked number 1 in the category “Most innovative North American law firms: New working models” by The Financial Times and was 1 of 7 firms shortlisted for The American Lawyer’s inaugural Legal Services Innovation Award. The firm has been recognized by the National Law Journal as a Legal Technology Trailblazer and featured by Bloomberg for its innovative service delivery models, which drive accuracy and predictability. The firm’s commitment to innovation is embodied in Thompson Hine SmartPaTHTM – a smarter way to work – predictable, efficient and aligned with client goals. For more information, please visit ThompsonHine.com and ThompsonHine.com/SmartPaTH.

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On October 16, the Federal Trade Commission (FTC) issued its<a> </a><a href="https://www.ftc.gov/system/files/ftc_gov/pdf/p064202_negative_option_rule.pdf" target="_blank" rel="noreferrer noopener">final rule</a> on negative option marketing practices – arrangements where a company automatically charges a consumer for a product or service unless the consumer takes affirmative actions to reject or cancel the arrangement. The final rule, which applies to all consumer-facing negative option practices regardless of how the initial arrangement is entered into, is intended to prevent unfair and deceptive practices that harm consumers and create unfair competition for legitimate businesses.

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Some of the final rule’s provisions take effect 60 days after the rule is published in the Federal Register; others, as noted below, take effect 180 days after publication. The rule imposes several requirements on companies whose sales and marketing practices include negative options, such as free trials and automatic renewals, including:

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Many states, including California, Colorado, Illinois, New York, Georgia, <a href="https://www.thompsonhine.com/insights/virginia-creates-new-requirements-for-b2c-and-b2b-auto-renewal-contracts/" target="_blank" rel="noreferrer noopener">Virginia</a> and <a href="https://www.thompsonhine.com/insights/utah-creates-new-consumer-protection-model-for-auto-renewal-and-trial-period-contracts/" target="_blank" rel="noreferrer noopener">Utah</a>, have already promulgated laws regulating negative option contracts. The FTC rule will only supersede a state statute if there is an inconsistency, and only if the FTC rule is more protective. Where the state statute provides greater protections for consumers, it will not be considered inconsistent with the FTC rule.

The final rule represents an expansion of the FTC’s authority and enforcement tools to address negative option marketing practices, which have been a persistent source of consumer complaints and litigation. The rule also provides clarity and consistency for companies that use negative option features. Companies that use or plan to use negative option features in their sales and marketing practices should consider the following actions:

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<em>This advisory bulletin may be reproduced, in whole or in part, with the prior permission of Thompson Hine LLP and acknowledgment of its source and copyright. This publication is intended to inform clients about legal matters of current interest. It is not intended as legal advice. Readers should not act upon the information contained in it without professional counsel.</em>

<em>This document may be considered attorney advertising in some jurisdictions.</em>

https://admin.thompsonhine.com/wp-content/uploads/2024/10/Contract-Law-Update-FTC-Releases-Final-Rule-on-Negative-Option-Practices-in-Consumer-Contracts.pdf

FTC Releases Final Rule on Negative Option Practices in Consumer Contracts

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