FTC Seeks Public Comments on Negative Option Rule

The Federal Trade Commission is seeking public comment on its Rule Concerning the Use of Prenotification Negative Option Plans (Negative Option Rule), 16 C.F.R. Part 425, as part of the agency's systematic review of its rules and guides. The Rule regulates one type of negative option marketing - so-called prenotification negative option plans for the delivery of merchandise. In this type of negative option marketing, consumers receive periodic announcements that merchandise will be delivered unless they decline the items within a set time.

The notice asks standard rule review questions, including whether there is a continuing need for the Rule, its benefits and costs, and what modifications, if any, should be made to account for changes in market-relevant technology or economic conditions. In addition, the notice solicits comments on whether the Commission should expand the Rule to address additional types of negative option marketing. The notice contains information about how the public can submit comments, which are due by July 27, 2009.

The Federal Trade Commission enforces the Prenotification Negative Option Rule. The Rule requires companies to give you information about their plans, clearly and conspicuously, in any promotional materials that consumers can use to enroll. If the sales presentation for a plan is made orally, say on the phone, the terms and conditions still must be disclosed clearly and conspicuously during the presentation. For example, companies must tell you:

• whether there's a minimum purchase obligation;
• how and when you can cancel your membership;
• how many announcements and rejection forms you'll receive each year, and how often you'll receive them;
• how to reject merchandise;
• the deadline for returning the rejection form to avoid shipment of the merchandise; and
• whether billing charges include postage and handling.

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