When the President signed the “Restore Online Shoppers’ Confidence Act” into law in the wee hours of 2010, the e-commerce landscape pretty much stayed the same. After all, the Federal Trade Commission (FTC) has been clamping down on recurring, unauthorized charges to credit and debit cards 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.
Politicians were looking to stop scams that worked like this:
- John buys a movie ticket online through MovieTickets.com.
- Immediately, John is besieged by a pop-up saying he can get $10 off his next purchase just by entering his email address.
- Since the pop-up appeared on a site John obviously trusted (by way of use), he enters his e-mail address to take advantage of the discount offer.
- Turns out that the pop-up was not associated with MovieTickets.com, but instead WebLoyalty — an online product marketing company.
- By entering his email address, John actually gave permission for MovieTickets.com to pass on his credit card information to WebLoyalty .
- At this point, a free trial for a membership for a “discount club” flashes across John’s computer screen. He is given the option to click “Yes” to complete the transaction with the WebLoyalty offer or to click “No” to complete his transaction without the WebLoyalty offer.
- Conditioned to click “Yes” when wanting to complete an online transaction, John does so and is now enrolled in a re-bill WebLoyalty “club” that actually costs him money monthly.
The 2010 Restore Online Shoppers’ Confidence Act
Only four pages in length, the new legislation is short and to the point. 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 his or her credit card in order to accept a post-transaction marketing offer.
Although the new law arose from a specific investigation, it will apply to the post-transaction marketing practices of all third party sellers. The law also forbids negative option schemes. Every Internet merchant that sells products or services with recurring charges – this includes all membership sites – should make sure they’re in compliance with the Restore Online Shoppers’ Confidence Act.
The new Act grants the FTC enforcement authority and authorizes State Attorneys to sue for injunctive relief in federal courts.
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 trail memberships that expire after a specific 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, rebills 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 rebilling, The 2010 Restore Online Shoppers’ Confidence Act shouldn’t have an effect on your operation. Moreover, the law doesn’t prohibit rebills, 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 Shopper’ Confidence Act prohibits merchants from:
- Funneling consumer credit information to third parties, and
- Charging credit cards without obtaining informed consent via an affirmative step, 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 consult on how they may apply to your business, consider contacting a qualified online marketing attorney.