Why The Restore Online Shoppers’ Confidence Act Became Law
There are too many Internet gurus (lawyer wannabes) sticking their shoes in their mouths yelling the “sky is falling” because of how the new Restore Online Shoppers’ Confidence Act (S.3386) will affect their Internet sales and marketing practices. 99% of Internet marketers won’t have a problem obeying this law to begin with because they aren’t screwing over clients using the deceptive tactics banned by the law.
Purpose of Restore Online Shoppers’ Confidence Act
And despite the doomsday scenario of a certain idiot guru who likes to post photoshopped fake checks of his earnings online, this law does not prevent Internet marketers from doing upsells and cross-sells of their own products to clients after initial purchase. Nor does it bar sales by third parties. It simply restricts how some upsells and cross-sells can be done to prevent some of the fraudulent conduct that has been plaguing ecommerce.
Text of Restore Online Shoppers’ Confidence Act
Here’s the text of the law below with my comments bracketed in bold text.
SECTION 1. SHORT TITLE.
This Act may be cited as the `Restore Online Shoppers’ Confidence Act’.
SEC. 2. FINDINGS; DECLARATION OF POLICY.
The Congress finds the following:
(1) The Internet has become an important channel of commerce in the United States, accounting for billions of dollars in retail sales every year. Over half of all American adults have now either made an online purchase or an online travel reservation.
(2) Consumer confidence is essential to the growth of online commerce. To continue its development as a marketplace, the Internet must provide consumers with clear, accurate information and give sellers an opportunity to fairly compete with one another for consumers’ business.
(3) An investigation by the Senate Committee on Commerce, Science, and Transportation found abundant evidence that the aggressive sales tactics many companies use against their online clients have undermined consumer confidence in the Internet and thereby harmed the American economy.
(4) The Committee showed that, in exchange for `bounties’ and other payments, hundreds of reputable online retailers and websites shared their clients’ billing information, including credit card and debit card numbers, with third party sellers through a process known as `data pass’. These third party sellers in turn used aggressive, misleading sales tactics to charge millions of American consumers for membership clubs the consumers did not want.
(5) Third party sellers offered membership clubs to consumers as they were in the process of completing their initial transactions on hundreds of websites. These third party `post-transaction’ offers were designed to make consumers think the offers were part of the initial purchase, rather than a new transaction with a new seller.
(6) Third party sellers charged millions of consumers for membership clubs without ever obtaining consumers’ billing information, including their credit or debit card information, directly from the consumers. Because third party sellers acquired consumers’ billing information from the initial merchant through `data pass’, millions of consumers were unaware they had been enrolled in membership clubs.
(7) The use of a `data pass’ process defied consumers’ expectations that they could only be charged for a good or a service if they submitted their billing information, including their complete credit or debit card numbers.
(8) Third party sellers used a free trial period to enroll members, after which they periodically charged consumers until consumers afbusinessatively canceled the memberships. This use of `free-to-pay conversion’ and `negative option’ sales took advantage of consumers’ expectations that they would have an opportunity to accept or reject the membership club offer at the end of the trial period.
SEC. 3. PROHIBITIONS AGAINST CERTAIN UNFAIR AND DECEPTIVE INTERNET SALES PRACTICES.
(a) Requirements for Certain Internet-Based Sales- It shall be unlawful for any post-transaction third party seller to charge or attempt to charge any consumer’s credit card, debit card, bank account, or other financial account for any good or service sold in a transaction effected on the Internet, unless–
(1) before obtaining the consumer’s billing information, the post-transaction third party seller has clearly and conspicuously disclosed to the consumer all material terms of the transaction, including–
(A) a description of the goods or services being offered;
(B) the fact that the post-transaction third party seller is not affiliated with the initial merchant, which may include disclosure of the name of the post-transaction third party in a manner that clearly differentiates the post-transaction third party seller from the initial merchant; and
(C) the cost of such goods or services; and
(2) the post-transaction third party seller has received the express informed consent for the charge from the consumer whose credit card, debit card, bank account, or other financial account will be charged by–
(A) obtaining from the consumer–
(i) the full account number of the account to be charged; and
(ii) the consumer’s name and address and a means to contact the consumer; and
(B) requiring the consumer to perform an additional afbusinessative action, such as clicking on a conbusinessation button or checking a box that indicates the consumer’s consent to be charged the amount disclosed.
(b) Prohibition on Data-Pass Used To Facilitate Certain Deceptive Internet Sales Transactions- It shall be unlawful for an initial merchant to disclose a credit card, debit card, bank account, or other financial account number, or to disclose other billing information that is used to charge a client of the initial merchant, to any post-transaction third party seller for use in an Internet-based sale of any goods or services from that post-transaction third party seller.
[Mike: Wow. The law actually requires Internet marketers to be transparent and open in their sales processes. No selling someone a front-end product and then funneling their credit card info over to a third party so you can make extra money using sneaky back end sales pitches. The client gets the relevant facts and then decides whether to purchase from the third party, including whether or not to give his credit card information out a second time. The Internet marketers who are complaining about this are some of the biggest dirt bags in the industry who have made money by cheating their clients with hidden back-end sales by third parties in exchange for an affiliate commission].
(c) Application with Other Law- Nothing in this Act shall be construed to supersede, modify, or otherwise affect the requirements of the Electronic Funds Transfer Act (15 U.S.C. 1693 et seq.) or any regulation promulgated thereunder.
(d) Definitions- In this section:
(1) Initial merchant- The term `initial merchant’ means a person that has obtained a consumer’s billing information directly from the consumer through an Internet transaction initiated by the consumer.
(2) Post-transaction third party seller- The term `post-transaction third party seller’ means a person that–
(A) sells, or offers for sale, any good or service on the Internet;
(B) solicits the purchase of such goods or services on the Internet through an initial merchant after the consumer has initiated a transaction with the initial merchant; and
(C) is not–
(i) the initial merchant;
(ii) a subsidiary or corporate affiliate of the initial merchant; or
(iii) a successor of an entity described in clause (i) or (ii).
SEC. 4. NEGATIVE OPTION MARKETING ON THE INTERNET.
It shall be unlawful for any person to charge or attempt to charge any consumer for any goods or services sold in a transaction effected on the Internet through a negative option feature (as defined in the Federal Trade Commission’s Telemarketing Sales Rule in part 310 of title 16, Code of Federal Regulations), unless the person–
(1) provides text that clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information;
(2) obtains a consumer’s express informed consent before charging the consumer’s credit card, debit card, bank account, or other financial account for products or services through such transaction; and
(3) provides simple mechanisms for a consumer to stop recurring charges from being placed on the consumer’s credit card, debit card, bank account, or other financial account.
[Mike: Imagine that. Restrictions on deceptive “negative option” sales and marketing tactics. Transparency, informed consent, and ability to stop recurring charges. Only a real sleazeball would object to these requirements.]
SEC. 5. ENFORCEMENT BY FEDERAL TRADE COMMISSION.
(a) IN GENERAL- Violation of this Act or any regulation prescribed under this Act shall be treated as a violation of a rule under section 18 of the Federal Trade Commission Act (15 U.S.C. 57a) regarding unfair or deceptive acts or practices. The Federal Trade Commission shall enforce this Act in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this Act.
(b) Penalties- Any person who violates this Act or any regulation prescribed under this Act shall be subject to the penalties and entitled to the privileges and immunities provided in the Federal Trade Commission Act as though all applicable terms and provisions of the Federal Trade Commission Act were incorporated in and made part of this Act.
(c) Authority Preserved- Nothing in this section shall be construed to limit the authority of the Commission under any other provision of law.
[Mike: Yeah! The U.S. Federal Trade Commission (FTC) can go after Internet marketing con artists who violate this law.]
SEC. 6. ENFORCEMENT BY STATE ATTORNEYS GENERAL.
(a) RIGHT OF ACTION- Except as provided in subsection (e), the attorney general of a State, or other authorized State officer, alleging a violation of this Act or any regulation issued under this Act that affects or may affect such State or its residents may bring an action on behalf of the residents of the State in any United States district court for the district in which the defendant is found, resides, or transacts business, or wherever venue is proper under section 1391 of title 28, United States Code, to obtain appropriate injunctive relief.
(b) NOTICE TO COMMISSION REQUIRED- A State shall provide prior written notice to the Federal Trade Commission of any civil action under subsection (a) together with a copy of its complaint, except that if it is not feasible for the State to provide such prior notice, the State shall provide such notice immediately upon instituting such action.
[Mike: Bonus. To make things more fun for the scammers, the law specifically authorizes every state attorney general (and other authorized state officers) to sue in federal court to stop Internet marketers who are violating this law.]
(c) INTERVENTION BY THE COMMISSION- The Commission may intervene in such civil action and upon intervening–
(1) be heard on all matters arising in such civil action; and
(2) file petitions for appeal of a decision in such civil action.
(d) CONSTRUCTION- Nothing in this section shall be construed–
(1) to prevent the attorney general of a State, or other authorized State officer, from exercising the powers conferred on the attorney general, or other authorized State officer, by the laws of such State; or
(2) to prohibit the attorney general of a State, or other authorized State officer, from proceeding in State or Federal court on the basis of an alleged violation of any civil or criminal statute of that State.
(e) LIMITATION- No separate suit shall be brought under this section if, at the time the suit is brought, the same alleged violation is the subject of a pending action by the Federal Trade Commission or the United States under this Act.
[Mike: Of course, if you have any specific questions about the Restore Online Shoppers’ Confidence Act, talk with your Internet lawyer. Ignore the yapping of the clueless gurus who are pretending to know what they’re talking about. You wouldn’t have them play doctor with your health. Don’t let them play lawyer with your business either.]
If there are any amendments to the Restore Online Shoppers’ Confidence Act, you’ll probably see future posts about them on this blog.