The Federal Trade Commission (FTC) has proposed new rules to make it easier for consumers to cancel online subscriptions, including streaming services, with civil penalties for companies that violate the rules. The proposed rulemaking is part of a broader review of the FTC's negative option rule and comes in response to concerns over companies like Amazon trapping consumers into retaining subscriptions.
“We agree that unless consumers have clear means to cancel negative option arrangements, they might develop a distrust for retailers, particularly in online commerce,” Stephanie Joyce, CCIA’s senior vice president and chief of staff, said in a June 23 Next TV news report. “CCIA is concerned that the record in this proceeding does not support the FTC’s proposed action and that the expansive, new rules would create duplicative and inconsistent obligations that would invite confusion and uncertainty for both businesses and consumers.”
The FTC recently sued Amazon after the company was charged with trapping customers into keeping their subscriptions by making it difficult to cancel them, Next TV reported. The case was the catalyst for the FTC's publishing of the Notice of Proposed Rulemaking, which is a part of a larger review of the 1973 negative option regulation.
While acknowledging the advantages of recurring payment plans, the FTC warned those plans may become problematic if cancellation is "either difficult or impossible," according to Next TV. The FTC has always utilized its rulemaking authority sparingly, choosing to sue or settle cases involving alleged violations of laws already in place prohibiting unfair or deceptive conduct. But the commission hinted it would be exercising its rulemaking authority under chair Lina Khan and indicated that this was a case of necessity.
Canceling a subscription to online video services and other subscription-based offerings must be "at least as easy" as signing up for one, the report said, referring to the FTC proposal. For instance, both activities must require completing the same number of steps on the same website.
Additionally, firms would have to send yearly warnings prior to auto-renewal for negative option programs for any product other than physical products, such as ongoing video subscriptions, according to Next TV. Additionally, the new regulation would force services to ask customers if they want to hear about future offers and accept "no" as a response.
FTC Chair Lina Khan, along with fellow Democratic commissioners Rebecca Kelly Slaughter and Alvaro Bedoya, voted in favor of the proposal, while Republican Christine Wilson opposed it because she thought the regulations were too broad, the report said.
