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The Federal Trade Commission (FTC) announced it will hold a virtual informal hearing on January 16, 2024, at 10 am ET on proposed amendments to the Negative Option Rule. During the hearing, six organizations that requested to present their positions orally will testify on issues raised during the rulemaking process. Out of more than 1,100 commenters, the six entities that requested to present their positions include: the International Franchise Association, TechFreedom, Performance Driven Marketing Institute, NCTA – the Internet & Television Association, FrontDoor and the Interactive Advertising Bureau (IAB). The FTC announced the proposed rulemaking on March 23 regarding changes to automatic renewal provisions for companies offering subscriptions and recurring payments. The Alliance submitted comments on June 23 reiterating that negative option subscription plans are already heavily regulated both at the Federal and state level and that the FTC has adequate existing authority to act in this area. The Alliance also recommended that the FTC only enact regulations that are consistent with existing best practices and established state laws. We will keep you apprised of this issue.

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The News/Media Alliance submitted comments on June 23 on the Federal Trade Commission’s Proposed Amendments to the Negative Option Rule, which was published in the Federal Register on April 24. The Alliance reiterated its position that negative option subscription plans are already heavily regulated both at the Federal and state level and that the FTC has adequate authority already to act in this area. If the FTC chooses to move forward, The Alliance recommended that the FTC only enact regulations that are consistent with existing best practices and established state laws. The comments state that our members and customers rely on automatic renewal programs to ensure uninterrupted service, convenience, and cost savings. The FTC argues the proposed Rule is needed due to widespread deceptive practices; however, given the dramatic expansion of subscription-based services, there is no evidence that complaints have risen proportionally. Expanding the rule as proposed is unnecessary and will impose an additional and inconsistent regulatory layer that will disrupt effective standardized practices businesses have put into place to comply with state laws.

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Fact Sheet originally published by MPA – The Association of Magazine Media

Download PDF of Fact Sheet

Efforts to Regulate Subscription Marketing Practices Should Avoid Penalizing Consumer-Friendly Magazines

Magazine media publishers maintain exceptionally high levels of subscriber satisfaction through well-understood, simple subscription management processes that benefit consumers.

THE ISSUE

The Federal Trade Commission (FTC) and some state legislatures are considering new rules to restrict auto-renewal practices widely used by many subscription services, including magazine media publishers. But the consumer-friendly magazine sector has developed time-tested subscription management practices that work for subscribers.

Customer satisfaction is a cornerstone of the magazine media industry’s viability and vitality. The overwhelming majority of print and digital magazines in the United States are sold by subscription – about 95 percent in 2020. Magazine media publishers uphold high levels of consumer satisfaction through well-understood, simple subscription management processes that benefit consumers.

Many subscriptions are sold with an advance consent feature that allows readers to affirmatively accept the automatic renewal of their subscription, providing subscribers the benefit of uninterrupted delivery of their favorite titles. Subscribers like this feature, as evidenced by the extremely low numbers of consumer complaints.

Proposals pending before the FTC and some state legislatures – which likely are intended to address legitimate concerns about the actions of some bad actors outside of the magazine sector – would entirely disrupt the long-standing subscriber relations practices of magazine media publishers.

A BETTER SOLUTION

Directly target abusive practices of specific bad actors.

Target the real problem, not consumer-friendly magazines, by zeroing in on specific abuses and actors.

THE TAKEAWAY

• The magazine sector has developed consumer-friendly subscription management practices that subscribers appreciate.
• Opt-in subscription renewal enables uninterrupted access to the magazine titles that subscribers love.
• Imposing broad-brush regulations would punish good actors and disrupt the positive relationship magazine media maintains with their subscribers.

Magazine Media Delivers

Valued & trusted content

• Content that is researched, curated and edited.
• Readers value our educational, cultural, scientific, and informational content, in long-form articles and on digital platforms.

Diverse & multigenerational connections

• Read by more than 90% of U.S. adults across all age groups and demographics, including 18-25.
• A 1.5 billion audience across all its platforms – digital, mobile, video and print.

Commitment & investment to our communities

• More than 240,000 U.S. jobs supported with an annual average wage of more than $98,000.
• Trusted, long-standing first party relationship based on respect and transparency for our readers.
• Partner in environmental stewardship, using bio-degradable, recyclable and certified materials.

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webphotographeer/E+ via Getty Images

As previously announced in Visa Business News (June 19, 2019/Sept. 26, 2019/Feb. 20, 2020), Visa will implement a new policy around subscription services that may impact newspaper publishers. This new policy, which will go into effect on April 18, establishes new rules for consumer disclosure and acceptance of free trials and promotional offers for recurring subscriptions of physical goods and digital services. With more than 15 percent of online shoppers having one or more recurring subscriptions – and growing, with increased digital commerce during the COVID-19 crisis – the credit card company is concerned that consumers may not be fully aware that a free trial or introductory offer will convert into a higher price and then automatically renew. Visa claims that credit card issuers are writing off tens of millions of dollars in sales annually after receiving consumer complaints. The new policy will provide cardholders with clearer information that will enable them to identify and act on subscription transactions and reduce the number of transactions that result in disputes.

The central component of the new policy is a requirement that merchants must send a reminder notification (e.g. email or SMS/text) at least seven days before a free trial or introductory offer expires and converts into a higher, recurring charge. The merchant is not expected to remind consumers before each recurring charge after the initial conversion, unless the terms and conditions in the original agreement have changed.

While supporting increased consumer transparency, the Alliance was concerned that the original Visa policy would have unintentionally led to subscriber churn, which would have jeopardized an important revenue stream for newspaper journalism. For example, the original policy – proposed June 19, 2019 –would have required the reminder notification to include a “link to online cancellation” and suggested that transaction receipts include an easier cancellation method such as an “unsubscribe button.” The Alliance entered into a dialogue with Visa representatives, who were responsive to our views and made important changes, including allowing merchants to link to an “online cancellation policy” so that consumers could manage their accounts online or through other means. Further, Visa is no longer suggesting that transaction receipts include an “unsubscribe button.” Most significantly, Visa released further guidance on February 20 in the form of Frequently Asked Questions that provided guidance on what type of marketing would be included in or excluded from the new Visa policy.

Depending on how newspapers market subscriptions to consumers, the new policy may not apply.

What Is In the Scope of the Regulation

The updated policy applies to merchants that provide goods/services via subscription (i.e. a recurring transaction), in which the subscription agreement with the cardholder includes either of the following:

– Free Trial: An initial period at zero cost to the cardholder to use the merchant’s service before the merchant’s regular price is applied for ongoing usage of the subscription.

– Discounted Introductory Offer or Promotional Period: An initial period with a preliminary cost to the cardholder that is clearly marketed, communicated, advertised or promoted to the cardholder as a discount to the merchant’s regular price before the merchant’s regular price is applied for ongoing usage of the subscription after the initial discounted period.

What Is Out of the Scope of the Regulation

The updated policy does not apply in the following scenarios:

– If the cardholder uses a discount code/voucher to reduce the merchant’s regular price at the time of completing the subscription enrollment with the merchant.

– A merchant’s regular pricing schedule increases over the term of the subscription agreement, which is disclosed to, and accepted by, the cardholder at the time of completing the subscription enrollment with the merchant.

– An offer of a satisfaction/“money back”/refund guarantee is provided at the time the cardholder agrees to the merchant’s regular price when completing the subscription enrollment with the merchant.

Our read of the second bullet above is that a newspaper subscription marketing campaign would not be covered by the policy if the publisher does not offer the consumer a free trial or discounted/promotional offer. Instead, the newspaper marketing campaign discloses to the consumer a regular pricing schedule that would increase over time, and that pricing schedule is agreed upon by the cardholder at the time of subscription enrollment. For example, the following approach might be out of scope of the regulation: “Sign up now for a digital subscription. Your price is $4.99 a month for three months and $9.99 per month thereafter. You can cancel anytime.”

It is worth noting that this pricing would have to be the regular pricing offered to all potential subscribers visiting a newspaper’s site. If the newspaper includes a money back guarantee, as described in the third bullet above, this would solidify the “out of scope” assessment.

While there are no fines or penalties for failing to comply with the new policy, Visa card issuers could certainly decline to work with any merchant that does not comply with the new rules. However, on April 14, Visa announced that it will be taking a “tailored and pragmatic” approach to compliance during the COVID-19 pandemic and, “as such, would delay enforcement of compliance actions related to the policy.” The company also said it was delaying a requirement for an “Enhanced Statement Descriptor” for the first transaction after a trial or promotional offer until April 17, 2021. Businesses and card issuers were struggling with how this could be done from a technological standpoint.

Here is Visa’s Quick Reference Card on its new subscription policy.

For more information, please contact Alliance Senior Vice President, Public Policy, Paul Boyle.

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