On December 29, 2010, President Obama signed the Restore Online Shoppers’ Confidence Act into law, after it passed in both the House and Senate. The Act was initially introduced by the Senate following hearings and an investigation by the Senate Committee on Commerce, Science, & Transportation concerning the online marketing practices of three membership clubs — Affinion, Vertrue, and Webloyalty — which engaged in post-transaction marketing of their membership club services on various online retailers. The Commerce Committee claimed that these companies engaged in allegedly deceptive sales tactics that exploited consumer expectations about the online checkout process, resulting in consumers being charged for membership clubs and services they were unaware they had purchased.
The law prevents online marketers from engaging in certain types of credit or debit card “data pass” and sets forth strict restrictions for online post-transaction third-party sales. It also places broad prohibitions on online negative option sales.
Post-Transaction Third-Party Sales
Negative Option Sales
The Restore Online Shoppers’ Confidence Act will likely have a significant impact on online retailers and marketers that pass or receive consumer data for post-transaction sales. The post-transaction sellers are now required to collect a consumer’s complete billing information and affirmative consent rather than receiving it from the initial retailer. Furthermore, all online companies that sell goods or services cannot simply assume that a consumer’s silence or failure to reject a good or service means that the consumer is accepting the offer for such goods or services.
It also should be noted that the Act expressly authorizes the FTC to enforce the law and to promulgate additional regulations. Violations of this law could result in a fine of $10,000 per violation in addition to civil action taken by the FTC. State attorneys general also are empowered to enforce this law upon prior notice to the FTC.
Legal News Alert is part of our ongoing commitment to providing up-to-the-minute information about pressing concerns or industry issues affecting our clients and our colleagues. If you have any questions about this update or would like to discuss this topic further, please contact your Foley attorney or the following:
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Chanley T. Howell