FTC Unsubscribes from Consumer Realities

Last week’s Federal Trade Commission open meeting to discuss its final “Negative Option Rule”  showcased how the agency is “Forgetting the Consumer” and, once again, unlawfully expanding its own authority.

By placing burdensome requirements on subscription models, the rule discourages companies of all sizes from offering automatic renewals, recurring payments, and even free trials.  Unfortunately, it is the consumer who will ultimately feel the impact of the rule, in the form of fewer options and higher prices. The potential for reduced offerings works against the FTC’s consumer protection mission.

Burdening Consumers and Businesses

For many consumers, subscriptions provide much-needed convenience for a wide range of products and services, including music and video streaming, on-demand delivery, news and magazines, software, food and beverage, and consumer products.

But with prescriptive disclosure and consent requirements, the new rule adds layers of complexity to a process that consumers have come to depend on for convenience and efficiency. 

Regulatory Overreach

The Negative Option Rule is the latest example of a concerning trend of FTC rulemaking based on questionable legal authority. The final rule is a dramatic departure from what the agency initially proposed.  Even worse, the rule prohibits conduct that the FTC has not demonstrated to be widespread, a violation of the law governing the limitations of FTC rules. 

Furthermore, the FTC is opening the door to more misuse of their power, potentially creating a backdoor for the agency to seek monetary relief for misrepresentations that are unrelated to the subscription practices that the rule is intended to govern. 

The FTC is chilling competition and entrepreneurship by creating an environment where companies skate on thin ice. That’s why the U.S. Chamber, along with other stakeholders in the business community, are dedicated to holding the FTC accountable and protecting a consumer-driven approach to the subscription economy.

About the authors

Ashley Gum