Negative option billing

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Negative option billing is a business practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing.[1]

This is, for example, the model on which mail order book clubs are structured.

Negative billing option is not illegal, but it can lead to problems if buyers do not fully understand the terms, or sellers do not accept a consumer's decision to decline a product. There is a class-action lawsuit against Scholastic, Inc. by consumers who felt "harassed, deceived, intimidated, and threatened" when they tried to cancel membership.[2]

In Ontario, Canada, regulations prohibiting negative option billing do not protect consumers from owing for goods or services that they have agreed to receive.[3]

[edit] Canadian law

In Canada, Parliament attempted to outlaw the practice in 1996 after a public outcry the previous year when most cable television companies added a package of new specialty services to their lineups in this manner. This had previously been the standard manner of adding new channels to cable television service, but had not previously attracted the type of controversy that was raised by the 1995 channel launch. A backbencher MP in the Parliament introduced a private-member's bill in 1996 to ban the practice which passed first reading, but died on the order paper when the House was dissolved for the 1997 elections. It was raised again in 1999, and was passed.

The concern associated with the practice of negative option billing has its origins in the nature of a contract of purchase and sale, as recognized in common law. As every first year law student learns, such a contract consists of an offer and an acceptance. The history of consumer protection statutes is a chronicle of legislators attempting to ensure that the offer is conveyed without misrepresentation by the vendor to a purchaser who has an opportunity to make an informed choice to accept or refuse the offer. This is because a contract that is made with a consumer who is unaware of key elements of the contract such as price, quantity and quality of the goods to be delivered is subversive of the efficiency of the market as a whole.[4]

The Ontario government also outlawed the practice in July 2005.[5]

[edit] References

  1. ^ FCC Memorandum opinion and order, 1996 "Negative option billing is the practice of giving customers a service that was not previously provided and then charging them for the service unless they specifically decline it."
  2. ^ "Parents Sue Educational Publisher Scholastic Alleging Misleading Billing, Marketing Scheme", PW Newswire, 2006-01-30.
  3. ^ http://www.gov.on.ca/mgs/en/ConsProt/STEL02_045943.html Ontario Ministry of Government and Consumer Services
  4. ^ Public Interest Advocacy Centre (PAIC) notes on Bill C-276
  5. ^ http://www.search.e-laws.gov.on.ca/en/isysquery/70e6a6e7-f3c5-4d45-8af7-09f373203186/1/frame/?search=browseStatutes&context= Ontario Consumer Protection Act, 2002