On Friday, June 23, ACT | The App Association submitted comments along with a letter signed by 25 App Association small business members to the Federal Trade Commission (FTC or Commission) in response to its Advanced Notice of Proposed Rulemaking (ANPRM), providing critical recommendations on proposed amendments to the Commission’s Negative Option Rule. These comments emphasized the need for the Commission to pause this rulemaking and take the time to consult with the American small business innovator community and other stakeholders who will be similarly impacted by the Negative Option Rule before advancing its proposals to final rules.
Frustratingly, a few days before our ANPRM comments were due to the FTC, the Commission brought a complaint to enforce the underlying Negative Option Rule and other parts of the FTC Act against Amazon. The complaint, which alleges that requiring consumers to go through six clicks to cancel their Prime subscription is illegal under the FTC Act, effectively ignores all of the considerations our members surface in their letter. This is a confusing turn of events for two reasons: first, because the Commission had indicated that it needed to complete the Negative Option Rule to ensure it had the legal authority to enforce the Rule in newer, digital market contexts. But just as importantly for our members is that the FTC effectively advertised an interest in small business views as to how the FTC should enforce or update the Negative Option Rule in the digital economy, but then apparently decided our input was irrelevant after all by bringing the complaint before the rulemaking process was complete.
The existing Negative Option Rule addresses how companies offer and manage subscriptions. The proposed updates to the rule would more closely regulate how subscriptions work, creating numerous feasibility and compliance challenges for small businesses without providing actual benefit to consumers including:
• Proposing a shift from an outcome-centered regulatory approach to one that rigidly dictates how compliance should occur, eliminating the flexibility our members need to effectively communicate with their consumers, and to evolve those means over time. For example, the FTC would mandate where, how often, and in what sequence subscription information for consumers must be featured and consented to – even imposing a requirement as to which day of the month a subscriber is charged• Putting mandates in place that would prevent our members from efficiently communicating truthful and accurate information to their customers;
• Using vague language including suggesting that subscription cancellations must be “as simple as initiation” without any further detail, when initiating and cancelling subscriptions are entirely different experiences; and
Ultimately, it is imperative that the Negative Option Rule protects consumers while providing the ability for innovators like our members to adapt and customize their communications strategies to meet consumer expectations in the market. The FTC’s proposed changes to its Negative Option Rule do not reflect this imperative, which puts our members’ central role in the growth and sustainability of the U.S. digital economy, as well as their global role and influence, at risk. In their letter, our members encouraged the FTC to partner with our community, consumers, and others affected by the FTC’s Negative Option Rule proposals to better understand the U.S. digital economy, the state of competition in the U.S. digital economy, and the role of subscriptions in meeting customer demands across the U.S. digital economy before advancing its proposals.