When you think about recent developments in eCommerce, technological advancements like mobile shopping; buy now, pay later; and, of course, AI are likely what comes to mind.
But at the same time, as technology as whole is swiftly evolving, so, too, is the legal landscape—especially in the area of auto-renewed subscriptions.
Recent events have highlighted the need for subscription businesses to remain vigilant, as any missteps can result in severe repercussions, such as large fines and significant reputation damage.
On March 24, 2023, the Federal Trade Commission (FTC) released proposed changes to the “Negative Option Rule” governing auto-renewed subscriptions.
Although the FTC has not yet indicated when those changes may go into effect, Cleverbridge is monitoring developments but wanted to preview what those proposed changes mean for subscription businesses and the broader subscription economy.
In essence, the FTC’s proposal would align US law more closely with current EU consumer protection laws.
The proposed changes include enhanced disclosure of subscription terms pre-purchase; powerful prohibitions against misrepresentations during the purchase process; express informed consent prior to entering into a subscription contract; and, post-purchase, a requirement to offer annual renewal reminders and easy cancellation methods. The proposed changes further expand the scope of covered products to nearly all negative-option (i.e., autorenewal) products, whether in the B2C or B2B space.
If this sounds like some pretty big changes, well, by US standards, they are.
But at Cleverbridge, it’s just how we do business.
As a company headquartered in Germany, the requirements outlined above have been our standard best practices for over a decade, and we have been complying with “two-click cancelation” regulation in Germany for quite some time now.
We take compliance seriously, which not only enhances end users’ experiences in purchasing the products sold on Cleverbridge’s platform but also protects our clients from potential liability.
To see the potential ramifications of non-compliance, look no further than the lawsuit the FTC filed against Amazon last week. There, the FTC claims that Amazon uses deceptive processes when enrolling users in Amazon Prime subscriptions and further sabotages users’ attempts to cancel through a complex, lengthy process it internally calls “the Iliad.”
If successful, the FTC could permanently enjoin Amazon’s practices, in effect eliminating its Prime program, and further obtain monetary damages for each infraction (i.e. each impacted consumer). And although the FTC is suing under existing and less stringent FTC regulations and the Restore Online Shoppers’ Confidence Act (ROSCA), this seems to be a warning—a shot across the bow, so to speak—in advance of the new regulations that even a behemoth like Amazon is not above the law.
Cleverbridge is committed to making it easy for you to maximize customer lifetime value compliantly. We are here to support you and help you navigate the complex global compliance landscape effectively.
If you would like to connect with a member of our team to unpack the consequences of the FTC’s proposed changes, and discuss any any concerns or questions your team can click here to get in touch.