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Navigating the FTC’s Expanding Negative Option Rule: What Business Owners Need to Know

April 15, 2023

Posted in Blog

Protect the assets in your businessThe Federal Trade Commission (FTC) recently announced its plans to significantly expand the “negative option” rule, potentially impacting a wide array of business-to-business (B2B) and consumer marketing practices. As a business owner, understanding these proposed changes is essential to avoid legal issues and adapt to the new landscape.

Understanding the Proposed Expansion

Currently, the Negative Option Rule focuses on prenotification plans provided to consumers, such as the Book-of-the-Month Club model. However, the FTC’s proposed expansion would apply to all types of negative option marketing, including continuity plans, automatic renewals, and free trials. Furthermore, the new rule would regulate any misrepresentation made about an underlying good or service sold with a negative option feature.

B2B Implications

The FTC’s expansion proposal includes extending the Negative Option Rule to B2B transactions, aligning with recent trends such as removing the B2B exemption from the Telemarketing Sales Rule. This means businesses should be prepared for the rule to affect various contracts and service agreements, which may need to be reconciled or revised to comply.

Potential Concerns for Businesses

Two primary aspects of the proposed rule’s wider scope may cause concern for businesses:

  1. The rule will cover all media forms, including telephone, internet, print, and in-person transactions. This extension could affect various business contracts, service agreements, and commercial leases with automatic renewal terms.
  2. The proposed rule prohibits misrepresenting any material fact related to the transaction or the underlying product or service, which could expose businesses to civil penalties and consumer redress.

Adapting to the Changes

While the FTC’s proposed expansion aims to enhance consumer protection and empower the agency to pursue civil penalties, the extensive nature of the proposed changes may lead to unforeseen consequences for businesses. It is crucial for business owners to stay informed about the ongoing developments in the rulemaking process and be ready to adjust their contracts and practices as needed.

Take Action Now

If you’re a business owner concerned about the potential ramifications of the FTC’s suggested modifications to the Negative Option Rule, it’s essential to seek expert guidance. Contact our business litigation law firm today to schedule a consultation and ensure your business is prepared for these far-reaching changes.  Call (714) 415-2007 today.