FTC Votes to Retain Negative Option Rule For Sales of Merchandise

The Federal Trade Commission today announced that it has voted to retain the Negative Option Rule, which governs the operation of prenotification subscription plans. Under these plans, sellers ship merchandise such as books, compact discs or tapes automatically to their subscribers, and bill them for the merchandise, if they do not expressly reject the merchandise within a prescribed time. The Negative Option Rule, which has been in effect since 1973, was reviewed by the agency as part of an ongoing review of its rules and guides.

According to a notice published in the Federal Register, the FTC believes the Rule continues to be of value to consumers and imposes minimal costs on industry. The notice summarizes the comments received about the Rule and outlines several technical, non-substantive amendments made to clarify the rule. Among other things, the Rule requires that operators of prenotification negative option plans:

• disclose the material terms of membership or subscription "clearly and conspicuously" in promotional materials;

• 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;

• ship substitute merchandise only with the express consent of the subscriber.

The Commission vote to retain the Rule and publish the Federal Register notice was 4-0.

Copies of the full text of the Federal Register Notice are available from the FTC's web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 6th Street and Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD 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. P974229)