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Product NewsData for subscriptions podcast - Episode #22
How to Make Your Subscription Business FTC-Compliant in 2024
Guest
Paavana Kumar
Partner, Davis+Gilbert LLP
Guest
Paavana Kumar
Partner, Davis+Gilbert LLP
Episode description
The FTC is planning new regulations in 2024 that will have a drastic impact on recurring revenues. This discussion delves into the critical aspects of running a compliant subscription business. They highlight three key points: reviewing user flow, consulting with legal counsel, and evaluating global operations. The discussion explores the role of influencers, the significance of consumer reviews, and challenges such as transparency and auditability. This episode offers valuable insights on tackling regulatory hurdles and ensuring success in the subscription industry.
Highlights
Why has the FTC chosen to propose updates to the regulatory framework?
I think that’s the impetus for the FCC to say, look, we’re going to propose one streamlined, updated negative option rule. It’s going to apply to subscription programs in all media because right now you’ve got a separate rule for online plan, you’ve got a separate rule for direct mail, you’ve got a separate rule for telemarketing plan. So let’s say now the negative option rule is going to apply to everything… I think my hunch is all of those, or at least 90% of them, are going to get codified into law. So this is really like a grace period from the FCC to say this is serious. We are going to investigate companies that have deceptive subscription tactics. This is kind of your notice to get buttoned up, you know, spend money if you have to, to audit your programs.
For businesses that are running subscriptions out there (that are uncertain whether to comply or not), what do you recommend?
The FCC’s guidance is very conservative, and I will frequently hear like, if we do all of this stuff, we’re gonna lose consumers, no one’s going to sign up. For example, the FCC says now you can’t upsell a consumer when they try to cancel unless you get their consent to do it first. And I have clients that are like, that’s crazy, that’s just advertising, you know, consumer retention has been around for decades. It’s just how do you save your consumers? And so there is a bit of a nuance to trying to make changes wisely. Recognizing the potential impact on revenue, but also recognizing that if you get investigated by the FTC, you probably have much bigger financial issues to worry about
Does the FTC make a difference between B2B and B2C or are there rules and regulations applied the same across?
A lot of states will have specific laws for B2B-type arrangements, like SaaS, maintenance, repair, personal property security, things like that, and then the FTC has interpreted ROSCA (Restore Online Shopper’s Confidence Act) again to apply the B2B transactions as well. And now in the proposed updates to the Negative Option Rule, the FCC is making it clear that they would enforce these in certain B2B contexts as well. So I’d say if you’re like an enterprise level software solution offering certain enterprise level services, primarily B2B, you still want to think about these.