In decades past, the Internet was commonly compared to the “Wild West.” Very few, if any, laws governed e-commerce. Ingenious online advertising schemes made millionaires overnight.
But the free-for-all didn’t last.
Several years post-Information-Superhighway-mania (remember when everyone called it that!?), legislators got down to the business of regulation. At first, politicians concerned themselves with criminal digital activity and protecting children online.
But in 2010, the 111th Congress of the United States passed the Restore Online Shoppers’ Confidence Act. A seminal statute, ROSCA was one of the first bills to establish Internet marketing regulations applicable to all businesses with an online presence.
What Is The Primary Purpose Of The Restore Online Shoppers’ Confidence Act?
The goal of the Restore Online Shoppers’ Confidence Act is, “To protect consumers from certain aggressive sales tactics on the Internet.”
Who Investigated The Need For ROSCA?
The Senate Committee on Commerce, Science and Transportation (CST) conducted an investigation into the good, bad and ugly of online marketing. After considerable due diligence, the committee issued a report outlining “abundant evidence” that aggressive online sales tactics were “harming the American economy.” At the time, CST members were most concerned with “data-pass” programs.
What Is A Data-Pass Program?
Data-pass schemes usually involved one party paying a “bounty” for customer data, which was usually obtained by enrolling consumers in “membership clubs” unbeknownst to them. One way of accomplishing this was by offering “post-transaction” offers, which appeared to be part of the initial offer. When a user would agree to a “post-transaction” deals, he or she was automatically enrolled in a subscription program, which deceptively appeared to be free.
What, Exactly, Does The Restore Online Shoppers’ Confidence Act Make Illegal?
Section 3 – “Unfair and Deceptive Internet Sales Practices”
Section 3 of the Restore Online Shoppers’ Confidence Acts prohibits “certain unfair and deceptive Internet sales practices.” It makes illegal all post-transaction, third-party seller schemes wherein the seller “charges or attempts to charge” any consumer unless:
- The marketer/seller provides a conspicuous disclosure of the material terms of the offer including a description of the offer and cost, plus a clear explanation that this transaction is separate than their initial transaction.
- The third-party previously received express informed consent by getting the customer to enter the full account identifier to be charged (i.e., an account or credit card number), their full name and address, in addition to their contact information.
- The buyer “performs an additional affirmative action, such as clicking on a confirmation button or checking a box that indicates the consumers’ content to be charged the amount disclosed.”
The third point is important. You must – we repeat, MUST – have a terms disclosure, coupled with a checkbox, which a buyer must click before checking out. If you don’t, you will eventually end up in a legal quagmire, with a the FTC Dysoning money out of your accounts.
Section 4 – Negative Option Marketing on the Internet
Section 4 of the Restore Online Shoppers’ Confidence Act expressly outlaws negative option marketing features, which are defined as:
“[An] offer or agreement to sell or provide any goods or services, a provision under which the customer’s silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer.”
It is not considered a negative option feature, however, if you:
- Conspicuously disclose all material terms of the transaction before getting billing information. This does not mean burying disclosures in the fine print; it means clearly and concisely disclosing material terms on a screen.
- Obtain express consent before charging the user.
- Provide simple opt-out mechanism.
Are Data-Pass Programs The Only Negative Option Schemes Outlawed in the U.S.?
No. Any and all online and offline negative option marketing campaigns or techniques are against the law in the United States.
Need to speak with a lawyer who understands everything about the Restore Online Shoppers’ Confidence Act? Contact RM Warner Law. Our practice focuses on all things technology- and Internet-law related. Lawyer review website AVVO thinks we’re a 10 out of 10, and we enjoy a superb rating in the 145-year-old Martindale-Hubble lawyer review directory. Get in touch, we’ll clear things up quickly and confidentially.