Reporting here on some recent developments regarding the FTC's amended Negative Option Rule (Rule), given that it goes into effect in just under a month (July 14), as we have previously reported.
- CRA Resolution. On June 9, Rep Laurel Lee (R-FL) introduced a resolution under the Congressional Review Act proposing that Congress disapprove of (effectively set aside) the Rule. Interestingly, although filed, there is no actual text of the resolution available on the official Congressional site. When reached for comment on this, Rep Lee's office responded "We don't need no stinkin' text!" JK!! But rest assured, the absence of actual text doesn't stop the wheels of that rational and well-oiled machine that is our beloved Congress from chugging along, as the (text-less) resolution was nonetheless referred to the House Committee on Energy and Commerce the same day it was introduced. Ah...Congress....
- 8th Circuit Oral Argument. On June 10, the 8th Circuit held oral argument on the various consolidated petitions challenging the FTC's process and authority in amending the Rule. The hearing, which ran just short of 45 minutes, can be heard here. Briefly...
- Petitioners argued the Rule is overbroad, as it, among other things, applies across unrelated industries, terms such as "material" and "easy" are too vague for businesses to comply with, the FTC failed to properly conduct a Paperwork Reduction Act (PRA) analysis (required for a "major rule" impacting the economy by over $100 MM), and improperly overrides existing federal statutes regulating recurring subscriptions, such as ROSCA, the Telemarketing Sales Rule, and other FCC rules.
- The FTC argued the Rule targets a prevalent and problematic issue in negative option marketing, is a valid exercise of the FTC's authority under Section 5 of the FTC Act, is neither vague nor overbroad, as it is limited only to negative option marketing practices, and its rulemaking process was proper and complete, in that it provided notice to and sought public comment on its proposals as well as other enforcement alternatives.
- The judges (i) seemed receptive to and challenged the FTC on petitioner's assertion that terms like "easy" and "material" were vague, thus providing challenges for compliance, (ii) questioned why the FTC could not rely on its existing laws and rules for enforcement for these offers, (iii) questioned whether or not the FTC's failure to conduct a PRA analysis was harmless error, (iv) noted the Rule's broad scope, questioning whether it was specific enough, as required by the Magnuson-Moss Amendments, and (v) questioned whether the FTC's interpretation of its rulemaking authority is consistent with the nondelegation doctrine.
We find it curious that the (Republican led) FTC is actively defending the Rule at the 8th circuit while its Congressional brethren(?) are simultaneously seeking to set it aside. Don't folks in DC talk to each other? 
Oh wait.. nevermind. Stay tuned, kids. The ride continues...
Oh wait.. nevermind. Stay tuned, kids. The ride continues... 
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