November 28, 2011

Internet Law Firm Explains ROSCA

In January 2011, a new federal law, the Restore Online Shoppers' Confidence Act, ("ROSCA"), 15 U.S.C. 8400 et seq., went into effect.ROSCA sets important new requirements for online merchants that employ negative options, continuity plans, or other subscription services. ROSCA also sets important requirements regarding the relationship between initial online merchants and post-transaction third party sellers.

Negative Option Marketing on the Internet

ROSCA prohibits any online merchant from charging or attempting to charge any consumer for goods or services sold over the Internet through a negative option feature, unless the online merchant: a) clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer’s billing information; b) obtains the consumer's express informed consent before charging the consumer; and c) provides the consumer with a simple mechanism to stop the recurring charges.

ROSCA borrows the definition of “negative option” from the Federal Trade Commission’s Telemarketing Sales Rule, 16 C.F.R. §310. This regulation defines a negative option as “an offer or agreement to sell or provide any goods or services, a provision under which the customer's silence or failure to take an affirmative action to reject goods or services or to cancel the agreement is interpreted by the seller as acceptance of the offer.”

Data Passing & Post-Transaction Third Party Offers

ROSCA also makes it unlawful for an initial merchant to disclose billing information to any post-transaction third party seller for use in an Internet-based sale from that post-transaction third party seller. ROSCA defines an initial merchant as “a person that has obtained a consumer’s billing information directly from the consumer through an Internet transaction initiated by the consumer.” ROSCA defines a post-transaction third party seller as 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 (ii) a successor of an entity described in clause (i) or (ii).”

ROSCA also makes it unlawful for any post-transaction third party seller to charge or attempt to charge a consumer for any good or service sold over the Internet, unless the post-transaction third party seller:

  • Clearly and conspicuously discloses all material terms of the transaction to the consumer before obtaining the consumer’s billing information, 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, and c) the cost of the goods or services; and
  • The post-transaction third party seller has received the express informed consent for the charge from the consumer by: a) obtaining the full account number of the account to be charged, b) obtaining the consumer’s name and address and a means to contact the consumer, and c), requiring the consumer to perform an additional affirmative action, such as clicking on a confirmation button or checking a box that indicates the consumer’s consent.

Click here for the full text of the ROSCA statute.

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