The FTC recently announced a settlement with the operators of RagingBull.com, an online stock trading site. This is a case about a company and its principals who allegedly preyed on retirees, older adults and immigrants during the pandemic, selling consumers bogus investment-related services that promised consistent profits from “secret trading techniques”. As set forth in the complaint, the defendants heavily marketed their products and program with advertising, affiliate marketing efforts and bogus testimonials with false earnings claims. In addition, the company purportedly locked consumers into hard-to-cancel subscription plans for the company's services. The settlement requires the company to pay nearly $2.5 million and to clean up its practices, both in how it makes earning claims and how it runs subscription programs.
It’s that clean-up of the subscription services that interests me here, because the requirements imposed on this company through the settlement agreement are ones worth noting even by legit subscription service sellers. The FTC has made -- and continues to make -- abundantly clear its concern with poorly disclosed and executed negative option programs, publishing extensive guidance and pursuing multiple enforcement actions under ROSCA and the FTC Act.
So, what’s of real interest here relating to the company’s negative option (subscription) program?
First, the Order is very prescriptive as to what would make necessary disclosures “clear and conspicuous,” as they must be. If communications are solely audio or solely video, the disclosure must be made through the same means. If the communication is both audio and visual, as in a TV ad, the disclosure must be made through both means, simultaneously, even if the representation requiring the disclosure is only audio or visual. And all disclosures in an interactive electronic medium must be “unavoidable.” Of course, they must also be easily noticed, read, understandable, not contradicted, etc. And, when the representation or sales practice targets a specific audience, including “children, the elderly, or the terminally ill,” ordinary consumers are the reasonable members of those groups.
Second, the “order confirmation” that the company sends to a consumer who signs up for a subscription must be stripped to its essentials – that is, contain no marketing (or, as the Order states, “no additional information” beyond the mandatory disclosures).
Third, to obtain consumers’ “express informed consent,” which all negative option sellers must do, the company must obtain that consent separately. Specifically, for all written offers, including online, the consumer must affirmatively accept the negative option feature (via check box, signature or other similar method) “and no other portion of the offer.”
And, finally, as part of the requirement that the company make subscription cancellation easy (as all negative option sellers must do), the Order provides that, consumers who subscribed orally and later use the phone to cancel their subscriptions, can’t be placed on hold by the company’s customer service team for longer than it takes to start a subscription and, at most, ten minutes. Further, if consumers leave a voicemail message, they must be called back within 1 business day.
While these requirements (along with all the others in the Order) are specific to this settlement with this company, they provide a road map to the types of problems that attract FTC scrutiny. They also underscore the importance of baking into a subscription program the fundamentals of negative option marketing: make disclosures clear, get consent, and make it easy to say goodbye.