Regulatory Reform Update: Negative Option Rule

As part of an ongoing review of the Rules and Guides it enforces, the Federal Trade Commission is seeking public comment about whether to retain, discard or amend the Negative Option Rule. The Rule, promulgated in 1973, applies to sellers of prenotification subscription plans who ship merchandise such as books, compact discs or tapes automatically to their subscribers on a periodic basis. The Rule requires that the companies notify subscribers in advance of shipping to allow them the option of declining the merchandise.

Specifically, the Rule requires that sellers:

• disclose specific information "clearly and conspicuously" in promotional material;
• send subscribers advance notice of the planned shipment and give them detailed information about how to decline the merchandise;
• notify subscribers of the circumstances under which they can return merchandise;
• give credit to subscribers and guarantee postage under certain circumstances;
• ship introductory or bonus merchandise within four weeks of receipt of an order;
• terminate subscriptions of contract-complete subscribers upon written request;
• ship substitute merchandise only with the express consent of the subscriber.

In a Federal Register Notice, published today, the FTC is seeking comments on:

• whether there is a continuing need for the Negative Option Rule;
• what changes, if any, should be made to the Rule to increase its benefit to consumers;
• the costs of compliance and what changes could be made to reduce them;
• whether the Rule overlaps or conflicts with other federal, state or local laws;
• the effects of recent technology, such as e-mail or the Internet, on the Rule;
• whether abuses are occurring that are not covered by the Rule’s provisions.

The Commission vote to publish the Federal Register Notice of the 60-day public comment period, until May 30 was 5-0.

Copies of the Federal Register Notice are available on the Internet at the FTC’s World Wide Web site at: http://www.ftc.gov and from the FTC’s Public Reference Branch, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-326- 2222; TTY for the hearing impaired 1-866-653-4261. To find out the latest news as it is announced, call the FTC NewsPhone recording at 202-326-2710.

(FTC File No. P97 4229)