On Friday, TechFreedom submitted a coalition letter in response to the Federal Trade Commission’s (FTC) request for public comment on proposed amendments to the Commission’s Negative Option Rule. Our letter expresses concerns about two aspects of the proposed rule that would, as drafted, disrupt the careful balance Congress struck in crafting the Federal Trade Commission Act. If the FTC is to have the authority to impose civil penalties for ordinary misrepresentations, even for certain classes of transactions, only Congress can confer that power—and only by amending the Act.

“The proposed rule would fundamentally transform the Commission’s remedial powers,” said Berin Szóka, President of TechFreedom. “The FTC could—for the first time—obtain civil penalties for claims involving product efficacy, national origin, how information about the consumer or the transaction is shared, used or secured, and much more. This would rewrite the FTC Act with respect to any product or service sold with an automatic renewal. Congress has never empowered the FTC to impose civil penalties for ordinary misrepresentations—and for good reason. The original FTC Act gave the FTC exceptionally broad power over ‘unfair or deceptive acts and practices’ (UDAP) but authorized only injunctive relief.”

“The proposed rule must focus only on truly deceptive negative option marketing,” Szóka continued. “Negative option marketing is not fundamentally fraudulent. Businesses such as newspapers, streaming services, and more use it lawfully and non-deceptively in a broad array of common transactions. Automatic renewal can provide convenience to the consumer—and will likely remain widespread among legitimate businesses. Therefore, the Commission should follow the example of its past Magnuson-Moss rulemakings and focus on specific, concrete examples of acts or practices related to negative option marketing that may be deceptive. Congress empowered the FTC to write deception rules, but required that they be specific in what they prohibit.” 

“As drafted, courts will invalidate the FTC’s negative option rule, which will benefit no one,” Szóka concluded. “To craft a rule that will be both effective in protecting consumers and capable of withstanding judicial challenge, the Commission must hold a hearing to explore how the rule should define with specificity acts or practices which are unfair or deceptive acts or practices. Congress provided for hearings precisely because the Magnuson-Moss Act requires specificity, and only a full discussion of concrete examples can lead to specific rules.”

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Find this letter on our website, and share it on Twitter, Bluesky, Mastodon, Facebook and LinkedIn. We can be reached for comment at media@techfreedom.org. Read our related work, including:

About TechFreedom: TechFreedom is a nonprofit, nonpartisan technology policy think tank. We work to chart a path forward for policymakers towards a bright future where technology enhances freedom, and freedom enhances technology.

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