October 16, 2024

CORREA HAILS NEW FTC ‘CLICK-TO-CANCEL’ RULE, CONSUMER ALERT ON SHRINKFLATION

Correa’s Original Letter Urging Action (PDF)

SANTA ANA, Calif. — Today, the Federal Trade Commission (FTC) announced a final “click-to-cancel” rule that will require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up their enrollment.

This is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy, where it’s easier than ever for businesses to sign up consumers for their products and services, yet challenging to cancel—an important change to protect all consumers, especially vulnerable groups like seniors and veterans.

These are actions that Representative Lou Correa (D-CA), the top Democrat on the House Subcommittee on the Administrative State, Regulatory Reform, and Antitrust, encouraged in a letter to FTC Chair Lina Khan earlier this year. In it, he applauded the FTC’s “efforts to protect consumers from deceptive and unfair practices, including price gouging, online, phone, and text scams, and the use of schemes that make it difficult to cancel subscriptions,” adding that the FTC should continue to take action “against these unlawful acts to improve the lives of everyday Americans.”

The final rule will provide a consistent legal framework by prohibiting sellers from:

  • misrepresenting any material fact made while marketing goods or services with a negative option feature;
  • failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
  • failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and
  • failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.

More details on the ‘click-to-cancel’ rule can be found HERE. A fact sheet on this new rule can also be found HERE.

Additionally, in that same letter, Correa highlighted increasing consumer prices paired with shrinking packaging, noting that “[w]e have seen manufacturers reduce the size of consumer products, even when the price remains the same or even increases[,]…shrinking product sizes leave unsuspecting consumers paying significantly more for essential products that cannot be explained by increases in costs for manufacturers or grocery stores.”

Correa requested the FTC create and disseminate an education campaign similar to its efforts to inform older Americans, immigrants, and veterans about scams that provide consumers with information on how to detect changes to products' sizes and fully understand the cost of consumer products. Specifically, Correa added that “[t]his education program would enable consumers to better understand how to interpret product labeling, pricing, and sizing, as well as to evaluate if the product contents may have changed. By empowering consumers with this knowledge, they can make better, more informed choices.”

Following Correa’s push, the FTC also issued a consumer alert highlighting shrinking packaging and what consumers should be cognizant of moving into the holiday season. In it, Jennifer Leach, a member of the FTC’s Division of Consumer and Business Education, notes that “[i]f you’ve been grocery shopping lately, you might have noticed that the box, can, or bag you usually buy might feel a little lighter…[b]esides hitting your wallet, shrinking packaging can increase the frustration factor for many, particularly as Fall leads to a season of cooking, baking, and hosting family and friends.” You can read the full alert with tips and tricks on how best to vote with your wallet HERE.

You can read the full text of Correa’s original letter HERE.