New ‘Confidence’ Law May Need Your Attention
On Dec. 29, 2010, President Obama signed Bill S. 3386 into law, the “Restore Online Shoppers’ Confidence Act.” The vote passed by unanimous consent in both houses and was one of four bills that the President signed that day so it kind of flew under the radar—although it will definitely affect the most people (of those four bills).
The text of the new law can be found here; it’s not that long and makes a decent read. It is designed to protect consumers from unfair and deceptive sales tactics on the Internet. So it’s well-intentioned and—while perhaps repeating some good practices that thorough and honest marketers already adhere to—may weed out those whose practices are deceptive and bring the industry as a whole down. The law came out of Sen. Jay Rockefeller’s aggressive investigation of online marketing practices involving the club industry.
As for SIPA, there are at least two clear ways that this new law may affect members:
– The law deals a lot with the “post-transaction third party seller.” It expressly prohibits data transfer of any consumer financial information for the purpose of billing a third-party transaction. For post-transaction up-sells, billing information will have to be collected from the consumer by the third party, as well as an “additional affirmative action” (an indication of consent).
– The law requires material terms of all negative option offers to be disclosed prior to the collection of consumer billing information. The seller must now “provide simple mechanisms for a consumer to stop recurring charges from being placed on the consumer’s credit card, debit card, bank account, or other financial account.” So basically, the options to cancel a subscription must be laid out very clearly; something most, if not all, SIPA members are already doing.
The last two sections of the new law give the Federal Trade Commission and state attorneys general the right to go after violators of these provisions. As with the collection of sales tax from Internet purchases, we may see different treatment from different states—some being more aggressive than others. Only time will tell on this front.
Reaction has come in from many corners—lawyers, marketers, bloggers. “…this law does not prevent Internet marketers from doing up-sells and cross-sells of their own products to customers after initial purchase,” wrote Mike Young, president of the Internet Attorneys Association, on his Internet Lawyer Blog. “Nor does it bar sales by third parties. It simply restricts how some up-sells and cross-sells can be done to prevent some of the fraudulent conduct that has been plaguing ecommerce.”
Bill Rothbard, a risk mitigation attorney with a great deal of FTC experience, wrote on Internet Works: “What was not anticipated…is the requirement that material purchase terms of up-sells, and of all negative option offers…be disclosed before obtaining the consumer’s billing information. This ‘late hour’ change to the law has the FTC’s fingerprints all over it. While current law (and earlier versions of the bill) requires only that material purchase terms be disclosed ‘before sale,’ (before billing authorization), the FTC favors the stricter ‘before billing information’ standard and routinely places it in consent orders. Now, with the imminent enactment of this law, this disclosure standard will be the law, one that is sure to have an impact on negative option and other online sales in 2011 and beyond…I expect the FTC and the attorneys general to enforce the Rockefeller Law aggressively.”
SIPA will continue to report on this issue so stay tuned to these SIPAlert Daily articles and look for the upcoming January Hotline newsletter.
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