This week, Senator Jay Rockefeller introduced and the Senate passed an amendment to S.3386: Restore Online Shoppers’ Confidence Act to require full disclosure to consumers of third party advance consent/negative option offers online and to prohibit “data pass” of billing from an online merchant to third party sellers.
The law is directly addressing the practice of upsells through third party sellers. It requires that the third party seller must obtain the purchaser’s billing information directly from the customer, not from the initial online merchant. And, before obtaining that information, the third party seller must clearly and conspicuously disclose to the purchaser all material terms of the transaction including a description of the goods, the cost, and the fact that the third-party seller is not affiliated with the initial seller. The bill then goes on to address limitations on use of negative options in Internet sales specifically, that is, a purchase program by which in remaining silent, the consumer tacitly agrees to accept the product/service, and that product/service will continue until the buyer actively requests it stop. Before obtaining the purchaser’s initial agreement to participate in the negative option plan, the seller has clearly and conspicuously disclosed all materials terms of the transaction, including – the name of the selling entity, a description of the goods, the cost, notice when billing will begin and at what intervals it will occur, length of any trial period, and instructions for stopping the charges.
The language is not significantly different from the FTC current requirements (Prenotification Negative Option Rule.16 C.F.R. Part 425), Advance Consent Marketing Guidelines on the ERA (Electronic Retailing Association) website, and on the Better Business Bureau’s website. However, with the hearings that senator Rockefeller held earlier in the Spring in particular with the major credit card companies (Master Card, Visa, and American Express) and identifying three companies that were especially egregious in their practices, the issue is now receiving more attention. It is under the aegis of the Federal Trade Commission and States’ Attorneys General may bring actions against violators who will be subject to fines.
This legislation affects all direct marketers – phone/catalog, Internet, and DRTV retailers that offer third party upsells. It is critical that merchants comply with these regulations, even before they become law. They are already part of industry best practices.
At Marketsmith we firmly believe that part of creating a good Brand experience for your customers is to be honest and upfront with them. The requirements in the bill should already be guidelines by which we as an industry operate. Recognizing that customers have the right to full disclosure and to just say no is part of letting them know we appreciate their business.
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