Negative options – make them a positive

There’s no such thing as a free lunch. That’s what consumers who signed up for NutraClick’s “free” samples learned. But what can your business take away from the FTC’s settlement with NutraClick?  If your company is considering offering a negative option program, and wants it to be a positive experience, you’ll want to read on.

Maybe you’ve heard of NutraClick. They sell nutritional supplements and beauty products including Force Factor, Peak Life, ProBioSlim, SomnaPure, VolcaNO, and Stages of Beauty. Their products are available online and in stores like Walgreens, Walmart, GNC and CVS. 

NutraClick advertised “free” product samples. But the company didn’t clearly tell consumers that to get the samples, they were automatically signed up for a membership for nutritional supplements, costing $29.99 to $79.99 per month. This type of offer – where consumers get regular shipments at a set rate until they cancel the agreement – is also called a negative option continuity plan.

The FTC’s complaint alleges that NutraClick violated Section 5 of the FTC Act by failing to adequately disclose all material terms of its negative option continuity plan. The complaint also alleges that NutraClick violated Section 4 of the Restore Online Shoppers Confidence Act (ROSCA) – a newer law governing Internet negative option sales – by failing to: (1) clearly and conspicuously disclose all material terms of its offer and (2) obtain consumers’ express informed consent before charging their credit cards.

Under the settlement between the FTC and NutraClick, the company cannot say that samples are free if accepting them enrolls consumers in a payment plan. They also must make clear how much consumers will be charged, the length of the trial period, and the way to stop recurring charges. For any oral offers of negative options, the company must get unambiguous affirmative consent before billing. Finally, the company must pay $350,000.

Want to make sure your company has a more positive experience with negative options? Remember that if you use a negative option, we’ve got you covered – under several laws, in fact. Think Negative Option Rule, FTC Act, and ROSCA. Here are some things to keep in mind about these laws.

Students of the Negative Option Rule know that it applies to only one type of negative option – where consumers get periodic announcements about upcoming shipments, have a period of time to decline, and then get the item if they don’t say no. So, that rule wasn’t at play in the NutraClick case. 

But if you’re using other types of negative options, you’re not off the hook. The FTC Act and ROSCA still apply. That means you’re covered whether you’re using a continuity plan (like NutraClick, where people get regular shipments at a set rate until they cancel), trial conversions (where people get free or reduced price shipments for a period of time then start getting billed at a higher rate if they don’t cancel), or automatic renewals (where companies continue to renew subscriptions – like magazine subscriptions – until people affirmatively cancel).

Want to steer clear of a ROSCA violation? Remember that ROSCA makes it illegal to use a negative option online unless the business:

• Clearly and conspicuously discloses all material terms of the transaction before getting consumers’ billing information;
• Gets consumers’ express informed consent before charging their accounts; and
• Offers simple ways for people to cancel and stop the recurring charges.

For more information about negative options, check out our blog “Acc-cen-tuate the negative?” And for further compliance guidance, visit the Business Center’s Advertising and Marketing portal.