Companies that sell or market goods or services using a “negative option” (where a customer’s failure to act results in an ongoing obligation) or automatic renewal plan (for example, subscriptions, service agreements, software agreements, and free trial conversion offers (free-to-pay)) offered by phone, online, or in person, should be aware that the FTC’s Negative Option Rule has been greatly expanded, and the FTC will begin enforcing the amended Rule beginning July 14, 2025. Some key notes on the expanded Rule:

1. Mandatory Disclosure of All “Material Terms” – the seller must clearly and conspicuously disclose all “Material Terms” of the agreement, regardless of whether those terms directly relate to the negative option feature. The Rule provides a non-exhaustive list of terms that must be disclosed. A Material Term is any part of your offer that would matter to the customer or influence their decision whether to sign up.
2. Express Affirmative Consent – the Rule sets out requirements for consent (e.g., the consent to the negative option feature must be separate from any other portion of the transaction), and sets out record-keeping requirements.
3. Simple Cancellation (Click to Cancel) – the Rule requires sellers to provide a “simple mechanism” for cancellation of any negative option feature or to avoid being charged, and the customer must be able to easily cancel using the same method they used to sign up. Basically, the seller must make it at least as easy for the customer to cancel as it was to sign up for the offer.
4. Prohibition against misrepresentations as to “Material” facts, even if the facts do not relate to the negative option feature. For example, the FTC suggested that when a company using negative option features in marketing or sales makes a misleading statement in the company’s website privacy policy having nothing to do with the negative option feature, the misrepresentation might constitute a violation of the Rule.
5. The Rule applies not only to marketing and sales to consumers, but also to business customers (B2B).

More information on the amended Rule can be found here: Click to Cancel: The FTC’s amended Negative Option Rule and what it means for your business | Federal Trade Commission

Businesses found by the FTC to have violated this policy may be subject to civil penalties. Additionally, while individuals cannot bring an action under the FTC Act and rules, state attorneys general can. State AGs have historically taken a very dim view of negative options, and frequently assert that negative option contracts, handled improperly, can violate a state’s Deceptive and Unfair Trade Practice Act. Moreover, at least 30 states, including Florida, have their own statutes regulating negative option contracts, with varying scope and obligations. Florida’s law, section 501.165, Fla. Stat., only applies to automatic renewal of service contracts, and violations of that law render contracts void and can subject the violator to civil penalties and/or consumer restitution in actions brought by the Florida AG. Individuals can also pursue restitution claims under the Florida statute, potentially resulting in consumer class actions.

If your company is using negative option features in their contracts or marketing, you should revisit this practice with your attorney to ensure compliance with existing law, including the amended FTC Rule. As Benjamin Franklin famously said, an ounce of prevention is worth a pound of cure.