When President Obama signed the “Restore Online Shoppers’ Confidence Act” into law, the e-commerce landscape pretty much stayed the same. After all, the Federal Trade Commission (FTC) has been clamping down on recurring, unauthorized credit and debit charges since the Acai Berry weight loss scams of 2009.
What E-Commerce Scams Does ROSCA Address?
The brainchild of Democratic Senator John Rockefeller (West Virginia), the “Restore Online Shoppers’ Confidence Act” is meant to curb deceptive — and often confusing — post-transaction affiliate marketing pitches.
A Typical E-Commerce Scam
- John buys a movie ticket online through AcmeT1ckets.com (not a real site).
- Immediately, John is besieged with pop-ups saying he can get $10 off his next purchase just by entering his email address.
- Since the pop-up appeared on a site John trusted, he enters his e-mail address to take advantage of the discount.
- Turns out that the pop-up was not associated with AcmeT1ckets.com, but instead a “Web loyalty” program for an online product marketing company.
- By entering his email address, John actually gave permission for AcmeT1ckets.com.com to share his credit card information to the third party.
- At this point, a free “discount club” membership trial flashes across John’s computer screen. He is given the option to click “Yes” to complete the transaction with the offer or “No” to complete his transaction without the offer.
- Conditioned to click “Yes” when wanting to complete an online transaction, John does so and is now enrolled in a re-bill “Web loyalty club” that costs him monthly.
The 2010 Restore Online Shoppers’ Confidence Act
Only four pages long, the new legislation is short and pointed. In concise language, the act stipulates greater transparency in post-transaction marketing offers. According to ROSCA, companies must:
- Disclose when they’re not affiliated with the referring merchant.
- Provide a clear description of the product or service they’re offering.
- Obtain informed consent expressly from consumers before enrolling them in recurring, fee-based programs.
- Disclose the terms of any recurring, fee-based programs, including instructions for membership cancellation.
- Require consumers to re-enter all 16 digits of their credit cards to accept a post-transaction marketing offer.
Although the new law arose from a particular investigation, all third party sellers must comply.
The law also forbids negative option schemes. Internet merchants that traffic in recurring charges — this includes all membership sites — should make sure they’re in compliance with the Restore Online Shoppers’ Confidence Act.
How Will the Restore Online Shoppers’ Confidence Act Affect Affiliate Marketers?
The Restore Online Shoppers Confidence Act addresses two main issues:
- Negative Option Billing – Negative option billing refers to a transaction in which goods or services are automatically billed on a schedule (usually monthly) unless the customer specifically declines the charge in advance. The practice is commonly deployed in conjunction with free trial memberships that expire after a term. It is not inherently illegal or unethical, so long as the customer understands the terms of the arrangement and the seller provides sufficient opt-out mechanisms.
- Re-billing – Re-billing refers to free trial offers often used to promote weight loss products, anti-aging potions, and discount clubs. Re-bill promotions are known for their hyperbolic, flamboyant language. Like negative option schemes, re-bills aren’t inherently illegal or unethical, so long as they are advertised in a way that allows buyers to understand the precise nature of the offer.
If you’re not engaging in negative option marketing or re-billing, The 2010 Restore Online Shoppers’ Confidence Act shouldn’t have an effect on your operation. Moreover, the law doesn’t prohibit re-bills, third party sales, or negative options; all it does is require a greater level of transparency, informed consent, and a mechanism that gives customers the ability to stop recurring charges.
Additionally, the Restore Online Shoppers’ Confidence Act prohibits merchants from:
- Funneling consumer credit information to third parties, and
- Charging credit cards without obtaining informed consent via an affirmative action, like checking an acceptance box or clicking on a button marked “I Agree.”
The Restore Online Shoppers’ Confidence Act may even benefit certain affiliate marketers. For some advertisers, CPAs (cost per action) may rise since they’ll no longer be competing with overly aggressive marketers.
For more information about the Restore Online Shoppers’ Confidence Act rules, and how it may affect your business, consider contacting a qualified online marketing attorney.