As the Federal Trade Commission noted in its recent press release announcing its settlement with Dun & Bradstreet (D&B), a leading provider of business credit reports, “The FTC is committed to taking action to halt abuses aimed at small businesses and other organizations.” And so it has.
According to the FTC’s complaint, D&B deceived companies about the benefits of CreditBuilder, a line of products advertised to small and mid-sized business customers to help them monitor, manage, and improve their own credit reports. The complaint further alleges that D&B used deceptive automatic renewal practices in subscribing business customers to the products; and reported inaccurate information on businesses’ credit reports without providing the businesses with a reasonable process for fixing errors.
While there’s much of interest in the complaint, and the proposed settlement requires changes to many of D&B’s practices, this post will focus on the auto-renew issues which, as readers of this blog know, is one of my favorite topics. The complaint describes D&B as failing to disclose the following: that it would automatically keep charging customers’ credit cards for an ongoing subscription to CreditBuilder; that it would charge prices at the subscription renewal that were materially different from the price to which the customers originally subscribed; that it would always charge the same or higher price for the renewal even if the product’s list price had gone down since the customer originally signed up; and that it unilaterally moved customers into different product tiers at a higher prices. Further, the complaint alleges that all of this non-disclosed information “would be material to affected businesses in their purchase decisions regarding CreditBuilder Line products.”
The proposed settlement (among other things) restricts D&B’s ability to automatically renew CreditBuilder subscriptions, requires D&B to make additional disclosures in its sale of such subscriptions, and prohibits D&B from using automatic renewal to switch a subscriber into a more expensive product that the subscriber did not order. If D&B plans to increase the price for an ongoing subscription, or provide a substitute product, it must provide advance notice to the customer and an option – and easy mechanism -- to cancel. The settlement also prohibits D&B from misrepresenting to current or potential customers any material fact about the price or features of any product. It also requires the company to give refunds to certain classes of customers and former customers and to provide an opportunity for many current customers to cancel their service and obtain refunds.
Notably, FTC did not charge D&B with violating the Restore Online Shoppers’ Confidence Act (ROSCA), the statute under which the FTC has brought numerous enforcement actions against marketers in connection with their auto-renewal practices. As in an earlier case against a B2B marketer involving its subscription program, the FTC used its general Section 5 authority here to challenge the defendant’s conduct as a deceptive act or practice. This is an important reminder that, at both the federal and state level, conduct that doesn’t necessarily violate a specific statute can still be considered deceptive or unfair and give rise to potential liability. ROSCA itself may be limited to B2C enforcement, but B2B negative option programs are neither off the regulators’ radar nor immune from liability.
Although state law requirements are detailed and varied and bear close study by marketers who provide free trials and subscription products and services, the principles underlying those laws, as well as those underlying ROSCA and the FTC's enforcement actions, are clear cut: disclosures must be clear and conspicuous, including and especially as to the auto-renew features; consumers must provide unambiguous consent to be charged on an ongoing basis; and consumers must be able to cancel without hassle.
Subscription marketers, both B2C and B2B, make this your motto for 2002: Clear, consensual, easy.