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Direct Response Marketing

Legal Review: Post-Transaction and Negative Option Marketing: What’s Next For Marketers

17 Aug, 2010 By: Marc Roth, Linda A. Goldstein Response

The first half of 2010 presented marketers who engage in post-transaction and negative option marketing programs with unprecedented challenges from legislators, state regulators and card associations — particularly regarding the passing of consumer information for these transactions. While a primary focus of this activity has been on so-called data pass, marketers should not forget that it was the aggressive marketing of these programs that initially gave rise to these events, and will likely to continue to be the focus of attention.

Direct response marketers should not assume that requiring a consumer to enter all 16 digits of his or her credit card to accept a post-transaction marketing offer will insulate the program from further scrutiny. Rather, marketers engaged in post-transaction sales should take this opportunity to review other aspects of their offers.

Based on discussions with the Senate Commerce Committee, the State Attorneys General and the Federal Trade Commission (FTC), it is clear that addressing the data pass issue is only the tip of the iceberg. Following are some additional areas of concern that marketers should be focusing on during this period of transition.

Clear Disclosure of the ‘Second Seller’

One of the primary concerns expressed by regulatory officials is their belief that consumers do not always understand that they are dealing with a separate seller. Marketers should pay close attention to any language directing the consumer from the primary marketer’s confirmation page to the post-transaction marketer’s landing page and particularly to any incentives being offered by the post-transaction marketer.

For example, regulators have objected to language such as “Get Your Cash Back Now,” which typically appears on the primary marketer’s page, arguing it does not sufficiently inform the consumer that the incentive is being offered by the post-transaction marketer.

Clear Disclosure of the Terms of the Offer

Regulators remain highly focused on all negative option marketing programs irrespective of whether they are offered as part of a post-transaction or primary sale.

A bill introduced by the Senate Commerce Committee proposes to regulate all forms of negative option marketing and not just those in a post-transaction marketing environment. It contains specific disclosure and data collection requirements for all negative option programs and a requirement that marketers provide a method of cancellation by either the Internet or E-mail.

Marketers should be mindful that disclosure of all terms and conditions in a long paragraph is not likely to be viewed as sufficient if challenged. Rather, key information should be disclosed in a short paragraph immediately adjacent to the button used to accept the offer.

Express Informed Consent

In the context of a negative option offer, it is imperative that the consumer’s consent is clear and unambiguous and that it relates directly to the entire terms of the negative option offer rather than simply to any free trial or incentive that is being offered. Accordingly, marketers should pay particular attention to the language used to elicit consent, whether on the telephone or online. Whatever mechanism is used to obtain consumer consent should provide a clear indication that the consumer is consenting to the complete terms of the negative option program.

Additional Privacy Concerns

Marketers should be aware that, as of the writing of this article, the degree to which they may pass any consumer information remains somewhat unsettled. Marketers should carefully consider what information they will request directly from the consumer and what information they will seek to obtain from the primary marketer.

Expansion to Offline

Notably, the proposed Senate Commerce Committee bill is limited to the online channel, and the Telemarketing Sales Rule expressly permits limited data pass for authorized post-transaction marketing upsells provided certain conditions are met. It remains to be seen whether and to what extent additional regulation applicable to the offline environment may be introduced. n

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