Negative option is where goods, membership or services are provided automatically, and the customer must either pay for the service or specifically decline it before being billed. The Electronic Retailing Association (ERA) call this practice “Advance Consent Offer” because “an essential element of these programs is that the consumer has consented in advance to receive future goods or services and/or to be billed in the future for the continuation of goods or services.” Negative option billing is not illegal. It falls to the consumer to understand the terms and conditions.
In order not to get billed the consumer must specifically decline the product or service.
The Columbia Record Club was the originator of negative option marketing. They offered five to ten books or records for 99¢.
You then (according to its terms) have joined as a “member.” Membership in the record club meant you would be sent monthly shipments of other books or records at the full price. You were required to cancel your membership which became known as taking the “negative option,” telling the company specifically you did not want to receive that month’s records or books. The practice has become much misused especially on the Internet.
Often today consumers get enrolled in “memberships” that get charged to their credit cards by either a smaller purchase (so the company will have your credit card on file) or shipping for a free sample. The complaint from consumers is they were not aware of the further charges. Legally these terms are nearly always published usully in Terms and Conditions. This is the modern equavalent of fine print as the link for reading the terms and conditions is not promonently displayed. The Federal Trade Commision (FTC) does not regulate this practice although they and congress have considered it. The only current law with Negative Option marketing outlaws cable television operators from using it. Interestingly, Credit Card company Visa monitoring complaints about merchants and announced that a hundred merchants would have their payment processing terminated because of those complaints.
The FTC did in 2009 charge NextClick Media for misleading consumers with smoking cessation patches called “Nicocure,” “Stop Smoking 180,” and “Zero Nicotine.” Consumers were told they would only be charged shipping for a product sample but later were charged $99.95 per month. Cancellation was impossible as the contact phone number always had a voice mail full message. The product did not work anyway.
Negative option companies relie on the fact that most people will forget they signed up at all. Often consumers will not notice the charges to their credit card for months when most of those payments can not be charged back.
While these plans may, at first, appear enticing because they offer reduced price or “free” merchandise, be certain you understand the overall cost. If you accept the offer you should save a copy of the advertisement, Terms and conditions and contact informaton. Make specific note of any cancellation deadline and through what process (phone, mail, etc.) they require and what deadline date there is. Make sure to read the screen carefully. Particularly to any check boxes on the form for ordering. Those check boxes may be for enrollement. More legitimate companies using the practice will have a link to read the Terms and Conditions right from the order form. READ IT!
If you fall victim to what you feel is a scam (Remember Negative Option marketing itself is legal) then contact your credit card company right away and dispute the charge. You may also want to file a complaint with the FTC. You can do that online at FTC.gov or call 877-FTC-HELP.