Negative option billing

Last updated

Negative option billing is a business practice in which customers are given goods or services that were not previously ordered, and must either continue to pay for the service or specifically decline it in advance of billing. [1]

Contents

This is, for example, the model on which mail order services, such as Columbia House, [2] and other book clubs are structured.

US law

According to the Federal Trade Commission, unsolicited goods are considered a gift, and the recipient is not required to pay for or return them. [3] [4]

This is different than situations where a customer signs up for a service or club without reading fine print and agrees to purchase goods through the mail. [3] [5]

A notable example is the class-action lawsuit against Scholastic Corporation by consumers who felt "harassed, deceived, intimidated, and threatened" when they tried to cancel membership. [6]

Canadian law

In Canada, Parliament attempted to outlaw the practice in 1996 after a public outcry the previous year when most cable television companies added a package of new specialty services to their lineups in this manner. This had previously been the standard manner of adding new channels to cable television service, but had not previously attracted the type of controversy that was raised by the 1995 channel launch, in part because the 1995 launch entailed a large number of channels which launched concurrently, whereas previous additions had only involved one or two channels at a time.

MP Roger Gallaway introduced a private-member's bill in 1996 to ban the practice which passed first reading, but died on the order paper when the House was dissolved for the 1997 elections. It was raised again in 1999, and was passed. Michael Janigan of the Public Interest Advocacy Centre stated:

The concern associated with the practice of negative option billing has its origins in the nature of a contract of purchase and sale, as recognized in common law. As every first year law student learns, such a contract consists of an offer and an acceptance. The history of consumer protection statutes is a chronicle of legislators attempting to ensure that the offer is conveyed without misrepresentation by the vendor to a purchaser who has an opportunity to make an informed choice to accept or refuse the offer. This is because a contract that is made with a consumer who is unaware of key elements of the contract such as price, quantity and quality of the goods to be delivered is subversive of the efficiency of the market as a whole. [7]

The Ontario government also outlawed the practice in July 2005. [8] Ontario's regulations prohibiting negative option billing do not protect consumers from owing for goods or services that they have agreed to receive. [9] Additionally, Alberta has outlawed negative billing in 1998. [10]

UK law

In the UK the law which applies is The Consumer Protection (Distance Selling) Regulations 2000 (2000 No. 2334), [11] specifically section 24 Inertia Selling. (This effectively replaces the repealed s.1 of the Unsolicited Goods and Services Act (1971, as amended). [12] ) In summary:

(2) The recipient [of unsolicited goods] may, as between himself and the sender, use, deal with or dispose of the goods as if they were an unconditional gift to him.

(3) The rights of the sender to the goods are extinguished.

Related Research Articles

<span class="mw-page-title-main">Federal Trade Commission</span> United States government agency

The Federal Trade Commission (FTC) is an independent agency of the United States government whose principal mission is the enforcement of civil (non-criminal) antitrust law and the promotion of consumer protection. The FTC shares jurisdiction over federal civil antitrust law enforcement with the Department of Justice Antitrust Division. The agency is headquartered in the Federal Trade Commission Building in Washington, DC.

The National Do Not Call Registry is a database maintained by the United States federal government, listing the telephone numbers of individuals and families who have requested that telemarketers not contact them. Certain callers are required by federal law to respect this request. Separate laws and regulations apply to robocalls in the United States.

<span class="mw-page-title-main">CAN-SPAM Act of 2003</span> American law to regulate bulk e-mail

The Controlling the Assault of Non-Solicited Pornography And Marketing (CAN-SPAM) Act of 2003 is a law passed in 2003 establishing the United States' first national standards for the sending of commercial e-mail. The law requires the Federal Trade Commission (FTC) to enforce its provisions. Introduced by Republican Conrad Burns, the act passed both the House and Senate during the 108th United States Congress and was signed into law by President George W. Bush in December 2003.

<span class="mw-page-title-main">Mobile phone spam</span> Unwanted communication through a mobile phone

Mobile phone spam is a form of spam, directed at the text messaging or other communications services of mobile phones or smartphones. As the popularity of mobile phones surged in the early 2000s, frequent users of text messaging began to see an increase in the number of unsolicited commercial advertisements being sent to their telephones through text messaging. This can be particularly annoying for the recipient because, unlike in email, some recipients may be charged a fee for every message received, including spam. Mobile phone spam is generally less pervasive than email spam, where in 2010 around 90% of email is spam. The amount of mobile spam varies widely from region to region. In North America, mobile spam steadily increased after 2008 and accounted for half of all mobile phone traffic by 2019. In parts of Asia up to 30% of messages were spam in 2012.

Junk faxes are a form of telemarketing where unsolicited advertisements are sent via fax transmission. Junk faxes are the faxed equivalent of spam or junk mail. Proponents of this advertising medium often use the terms broadcast fax or fax advertising to avoid the negative connotation of the term junk fax. Junk faxes are generally considered to be a nuisance since they waste toner, ink and paper in fax machines.

<span class="mw-page-title-main">False advertising</span> Misleading content in advertisements

False advertising is the act of publishing, transmitting, or otherwise publicly circulating an advertisement containing a false claim, or statement, made intentionally to promote the sale of property, goods, or services. A false advertisement can be classified as deceptive if the advertiser deliberately misleads the consumer, rather than making an unintentional mistake. A number of governments use regulations to limit false advertising.

Email marketing is the act of sending a commercial message, typically to a group of people, using email. In its broadest sense, every email sent to a potential or current customer could be considered email marketing. It involves using email to send advertisements, request business, or solicit sales or donations. Email marketing strategies commonly seek to achieve one or more of three primary objectives: build loyalty, trust, or brand awareness. The term usually refers to sending email messages with the purpose of enhancing a merchant's relationship with current or previous customers, encouraging customer loyalty and repeat business, acquiring new customers or convincing current customers to purchase something immediately, and sharing third-party ads.

<span class="mw-page-title-main">Debt collection</span> Pursuit of debt payments owed by an individual or business

Debt collection is the process of pursuing payments of money or other agreed-upon value owed to a creditor. The debtors may be individuals or businesses. An organization that specializes in debt collection is known as a collection agency or debt collector. Most collection agencies operate as agents of creditors and collect debts for a fee or percentage of the total amount owed. Historically, debtors could face debt slavery, debtor's prison, or coercive collection methods. In the 21st century in many countries, legislation regulates debt collectors, and limits harassment and practices deemed unfair.

The term opt-out refers to several methods by which individuals can avoid receiving unsolicited product or service information. This option is usually associated with direct marketing campaigns such as e-mail marketing or direct mail. A list of those who have opted out is called a Robinson list.

The Junk Fax Prevention Act (JFPA) of 2005, Pub. L.Tooltip Public Law (United States) 109–21 (text)(PDF), 119 Stat. 359 (2005), was passed by the United States Congress and signed into law by President George W. Bush on July 9, 2005. The law amends the Communications Act of 1934, significantly altering some aspects of prior amendments made by the Telephone Consumer Protection Act of 1991 and the CAN-SPAM Act of 2003 as they relate to the issue of junk fax.

<span class="mw-page-title-main">Cold calling</span> Form of business solicitation

Cold calling is the solicitation of business from potential customers who have had no prior contact with the salesperson conducting the call. It is an attempt to convince potential customers to purchase either the salesperson's product or service. Generally, it is referred as an over-the-phone process, making it a source of telemarketing, but can also be done in-person by door-to-door salespeople. Though cold calling can be used as a legitimate business tool, scammers can use cold calling as well.

<span class="mw-page-title-main">Rent-to-own</span> Type of transaction

Rent-to-own, also known as rental purchase or rent-to-buy, is a type of legally documented transaction under which tangible property, such as furniture, consumer electronics, motor vehicles, home appliances, engagement rings, and real property, is leased in exchange for a weekly or monthly payment, with the option to purchase at some point during the agreement.

<span class="mw-page-title-main">Consumer Protection (Distance Selling) Regulations 2000</span> United Kingdom legislation

The Consumer Protection Regulations 2000, SI 2000/2334, implements European Directive 97/7/EC as UK law. They apply to contracts "concluded between a supplier and a consumer under an organised distance sales or services provision scheme run by the supplier who, for the purposes of the contract, makes use of one or more means of distance communication" up to and including the moment the contract is agreed. The legislation provides rights to the consumer and obligations which the seller must fulfill.

<span class="mw-page-title-main">Unsolicited goods</span>

Unsolicited goods are, in British law, goods delivered to an individual with a view to the individual acquiring them, but where the individual has no reasonable cause to believe that they were delivered for legitimate business and had not previously agreed to acquire them. These were regulated under the Unsolicited Goods Act 1971 but the Consumer Protection Regulations 2000 are stricter in every respect rendering the 1971 Act largely redundant from a consumer law perspective, although there is no express repeal. However the said distance selling regulations only apply to consumers so a business receiving the goods on an unsolicited basis would need to look at the 1971 Act. Also with effect from 14 June 2014 the distance regulations are replaced by The Consumer Contracts Regulations 2013 which include a new s 29A added to the Consumer Protection from Unfair Trading Regulations 2008 making it clear the consumer may keep unsolicited goods. The 2008 regulations prohibit as a criminal offence various unfair advertising and marketing practices and in paragraph 29 of Schedule 1 make it a criminal offence to engage in "Demanding immediate or deferred payment for or the return or safekeeping of products supplied by the trader, but not solicited by the consumer, except where the product is a substitute supplied in accordance with regulation 19(7) of the Consumer Protection Regulations 2000 ".

A continuity program is a company’s sales offer where a buyer/consumer is agreeing to receive merchandise or services automatically at regular intervals, without advance notice, until they cancel.

Consumer protection is the practice of safeguarding buyers of goods and services, and the public, against unfair practices in the marketplace. Consumer protection measures are often established by law. Such laws are intended to prevent businesses from engaging in fraud or specified unfair practices to gain an advantage over competitors or to mislead consumers. They may also provide additional protection for the general public which may be impacted by a product even when they are not the direct purchaser or consumer of that product. For example, government regulations may require businesses to disclose detailed information about their products—particularly in areas where public health or safety is an issue, such as with food or automobiles.

<span class="mw-page-title-main">Cable Television Consumer Protection and Competition Act of 1992</span> United States federal law

The Cable Television Consumer Protection and Competition Act of 1992 is a United States federal law which required cable television systems to carry most local broadcast television channels and prohibited cable operators from charging local broadcasters to carry their signal.

In re Gateway Learning Corp, 138 F.T.C. 443 File No. 042-3047, was an investigatory action by the Federal Trade Commission (FTC) of the Gateway Learning Corporation, distributor of Hooked on Phonics. In its complaint, the FTC alleged that Gateway had committed both unfair and deceptive trade practices by violating the terms of its own privacy policy and making retroactive changes to its privacy policy without notifying its customers. Gateway reached a settlement with the FTC, entering into a consent decree in July 2004, before formal charges were filed.

The Telemarketing and Consumer Fraud and Abuse Prevention Act is a federal law in the United States aimed at protecting consumers from telemarketing deception and abuse. The act is enforced by the Federal Trade Commission. The act expanded controls over telemarketing and gave more control to prescribe rules to the Federal Trade Commission. After the passage of the act, the Federal Trade Commission is required to (1) define and prohibit deceptive telemarketing practices; (2) keep telemarketers from practices a reasonable consumer would see as being coercive or invasions of privacy; (3) set restrictions on the time of day and night that unsolicited calls can be made to consumers; (4) to require the nature of the call to be disclosed at the start of any unsolicited call that is made with the purpose of trying to sell something.

Financial privacy laws regulate the manner in which financial institutions handle the nonpublic financial information of consumers. In the United States, financial privacy is regulated through laws enacted at the federal and state level. Federal regulations are primarily represented by the Bank Secrecy Act, Right to Financial Privacy Act, the Gramm-Leach-Bliley Act, and the Fair Credit Reporting Act. Provisions within other laws like the Credit and Debit Card Receipt Clarification Act of 2007 as well as the Electronic Funds Transfer Act also contribute to financial privacy in the United States. State regulations vary from state to state. While each state approaches financial privacy differently, they mostly draw from federal laws and provide more stringent outlines and definitions. Government agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission provide enforcement for financial privacy regulations.

References

  1. ↑ FCC Memorandum opinion and order, 1996 "Negative option billing is the practice of giving customers a service that was not previously provided and then charging them for the service unless they specifically decline it."
  2. ↑ "Columbia House – How It Works". Columbiahouse.com. Retrieved 2015-03-11. If you want the Director's Selection, just sit back and relax – we'll send it to you automatically
  3. 1 2 "Unordered Merchandise". Consumer Information. 11 February 2016. Retrieved 9 June 2018.
  4. ↑ Service, United States Postal. "Unsolicited Merchandise". about.usps.com. Retrieved 9 June 2018.
  5. ↑ "How Buying Plans Work". Consumer Information. 21 August 2012. Retrieved 9 June 2018.
  6. ↑ "Parents Sue Educational Publisher Scholastic Alleging Misleading Billing, Marketing Scheme", PW Newswire, 2006-01-30.
  7. ↑ "Public Interest Advocacy Centre (PAIC) notes on Bill C-276". Archived from the original on 2012-02-09. Retrieved 2007-11-14.
  8. ↑ Ontario Consumer Protection Act, 2002
  9. ↑ Ontario Ministry of Government and Consumer Services
  10. ↑ "Fair Trading Act" (PDF). Queens Printers. Queens Printers. Retrieved 6 July 2017.
  11. ↑ "The Consumer Protection (Distance Selling) Regulations 2000". The Stationery Office. 2000. Retrieved 2015-05-16– via legislation.gov.uk.
  12. ↑ "Unsolicited Goods and Services Act 1971". The Stationery Office. 1971. Retrieved 2015-05-16– via legislation.gov.uk.
This page is based on this Wikipedia article
Text is available under the CC BY-SA 4.0 license; additional terms may apply.
Images, videos and audio are available under their respective licenses.