Legal Review: Are You in Compliance in the Post-Rockefeller Bill Era?1 Apr, 2011 By: Linda A. Goldstein Response
Now that Sen. Jay Rockefeller’s, D-W. Va., bill, the Restore Online Shopper’s Confidence Act, has passed, DR marketers have turned their attention from lobbying to compliance. As the Act went into effect immediately, marketers have had to react quickly.
Naturally, since the prohibition on data pass was the portion of the bill with the most significant impact on the industry, most marketers were initially focused on bringing this aspect of marketing campaigns into compliance. In the haste to comply, however, marketers should not overlook other important details of the Act that present additional pitfalls for marketers who continue to conduct post-transaction sales or negative option marketing of any type.
For marketers who are continuing to engage in post-transaction marketing (“upselling”) online, it is important to remember that the Act requires more than simply asking the consumer to re-enter the 16-digit credit card number to accept a post-transaction offer. Specifically, the Act requires that the third-party seller obtain the full account number and the consumer’s name, address and means to contact the consumer — and the Act further prohibits the initial merchant from disclosing any other “billing information” to the third-party merchant.
While the term “billing information” is not defined, it could reasonably be interpreted to include expiration data and CVV. Therefore, the prudent approach would be to require the consumer to re-enter all billing information that the third party requires to bill the consumer for the goods or services being offered. The Act also requires a separate affirmative act of consent by the consumer to the post-transaction sale, such as by checking a box or clicking a confirmation button.
Marketers should also carefully examine the disclosures accompanying the post-transaction sale. The Act specifically requires that the material terms and conditions be disclosed “before” the billing information is obtained from the consumer. This suggests that disclosure of the terms of the offer before the submit button may no longer be sufficient.
While one might attempt to argue that the merchant does not “obtain” the information until the consumer clicks the submit button, a more prudent approach would certainly be to include the disclosures before the billing information is provided by the consumer. Marketers should be particularly mindful of the requirement to disclose that the third-party seller is not affiliated with the initial merchant in a way that clearly differentiates the post-transaction third-party seller from the initial merchant.
In order to comply with this requirement, marketers should pay very close attention to the manner in which the “confirmation” page on which the third-party offer is presented is branded. In other words, it should be very clear to the consumer when they are providing their billing information for a second time that they are now providing it to a different seller.
Finally, while the prohibition on data pass was clearly the primary focus of the Rockefeller bill, marketers should not lose sight of the bill’s requirements for all negative option marketing conducted on the Internet — whether as a primary or secondary sale. In particular, marketers offering any products or services online with a negative option feature such as free trial, continuity or automatic renewal should take a close look at the manner in which the disclosures are being made on their landing and order pages to ensure that they are compliant with the Act’s requirements. As with post-transaction sales, the bill requires that the material terms and conditions of the transaction be disclosed “before the consumer’s billing information is obtained.”
The Federal Trade Commission (FTC) has been vested with the authority to enforce this Act with the same force as a Trade Regulation Rule. This means violations of the rule could subject a company to penalties of up to $16,000 per violation — and with mass marketing those can certainly add up. Given the recent focus on negative option marketing and upselling, the proliferation of class actions and the FTC’s new enforcement authority here, marketers should take a close look at their marketing materials to ensure compliance.
Linda A. Goldstein is chair of the Advertising, Marketing and Media division of Manatt, Phelps & Phillips, LLP, based in the firm’s New York office.