A What Not to Do List
The Restore Online Consumer Confidence Act
ROSCA is the rule under the FTC that regulates negative option offers. You know those offers, they go something like this:
Step 1: A “risk-free” trial offer; Step 2: Undisclosed charges if you don’t cancel the un-risky trial; Step 3: You also got that automatic shipping with your free trial; Step 4: You end up with confusing and illegal charges to your credit card; Step 5: No matter how you try, you can’t stop the shipments and charges.
In a recent lawsuit against a Puerto Rican business owner (and his eight companies), the FTC found multiple ROSCA violations. The business sold skin care products using the “risk-free” trials for products sold in pairs which consumers believed would cost them “just $4.95” to evaluate over a 2-week period.
However, in the already hard to read terms and conditions was an even harder to see hyperlink that led consumers past the fine print to the teensy tiny print. Only after clicking the hyperlink would a consumer be able to see that after the two weeks were up, they would not only be charged $90 instead of $4.95, but they were also automatically enrolled in the scheduled shipments until they actively cancelled.
As the FTC points out: size does matter. The misleading offer was in large print during the checkout process and included a second misleading free trial offer (with the exact same egregious terms as the first), but the relevant terms and conditions were buried in the fine print.
Among the many violations, the Puerto Rican company assured consumers that they could cancel the orders any time but in reality, consumers could barely reach an operator. They often received only partial refunds (with the shipments continuing). Further, the company allegedly used more than 100 fake names as well as false employer id numbers in order to hide the operations from payment processors and banks.
While this case is an extreme example of ROSCA violations, online retailers can avoid these traps by following the clear ROSCA guidance. As the FTC states, ROSCA prohibits online negative options “unless the seller: 1) clearly discloses all material terms of the deal before obtaining a consumer’s billing information; 2) gets the consumer’s express informed consent before making the charge; and 3) provides a simple mechanism for stopping recurring charges”. No secret or hidden rules and conditions in fine print.
The FTC continues to focus on enforcement of negative option offers. Take positive and proactive steps to review terms and conditions and payment processing procedures in any online offer. You don’t want to end up as an example of what not to do.