Bill Protecting Online Shoppers Signed Into Law

This posting was written by John W. Arden.

Legislation aimed at protecting consumers from aggressive sales tactics on the Internet was signed by the President on December 29.

The “Restore Online Shoppers’ Confidence Act” (S.3386) intends to protect online consumers from unfair and deceptive sales tactics on the Internet by:

(1) Requiring companies that offer goods or services on other companies' websites to make material disclosures and to obtain express informed consent before charging consumers' financial accounts;

(2) Prohibiting companies from transferring their customers' billing information to companies that are offering goods or services on their websites; and

(3) Requiring companies that use "negative options" (i.e., require consumers to take an affirmative action to reject goods or services) to disclose material terms of a transaction, obtain a consumer’s express informed consent, and provide simple mechanisms for a consumer to stop recurring charges on a credit card, debit card, or bank or financial account.

The new law will be enforced by the Federal Trade Commission, and violations are to be treated as violations of a rule under the Federal Trade Commission Act. The law also may be enforced through civil actions brought by state attorneys general, which must provide prior written notice to the Commission.

FTC Chairman Jon Leibowitz voiced his support of the measure upon its passage by the House of Representatives on December 15.

We’re pleased Congress passed this legislation,” Leibowitz said in a December 15 statement. “Too many companies are trying to use phony monthly billing to rip off Americans, and this bill will help strengthen our hand. Consumers should be able to make informed decisions, so the terms and conditions of any offer must be disclosed clearly and conspicuously.”

Further information about the legislation appears in a December 20 posting on Trade Regulation Talk. Text of the measure appears here in the December 15 Congressional Record.