Silence as Consumer Consent: Global Regulation of Negative Option Contracts

78 Pages Posted: 16 May 2024

See all articles by Kaitlin Ainsworth Caruso

Kaitlin Ainsworth Caruso

University of Maine - School of Law

Prentiss Cox

University of Minnesota Law School

Date Written: May 16, 2024

Abstract

Worldwide, the “subscription economy” has exploded in recent years, especially among online sellers of consumer goods and services. These subscriptions use various contract forms-- but many have one common feature: the negative option. With a negative option contract, once a consumer has signed up, the contract will continue until the consumer actively reaches out to cancel it. These are wildly popular among sellers, as they create continuous income and put inertia on the sellers' side. Unsurprisingly, then, consumers complain in extraordinary numbers about being trapped in agreements that are easy to sign up for but seemingly impossible to cancel. Even worse, consumers pay—sometimes for years—for scam or marginal “subscriptions” that they never meant to sign up for in the first place.

Governments around the globe have scrambled to respond (with mixed success) to this wave of complaints. This Article surveys that landscape, assessing the consumer risks and benefits of negative option contracts, cataloging the regulatory responses across countries, and taking stock of why much of that regulation (especially the disclosure-centric regulation) will fall short. It proposes a new model law that retains essential consumer disclosures, but affords greater substantive protections for consumers. In particular, the model law would prevent free trials from rolling over into paid negative-option contracts, extend the cancellation periods for automatically renewed contracts, and require sellers to stop charging consumers who have stopped using their services (or eliminate automatically renewing term contracts altogether). With negative option contracts and consumer discontent on the rise, now is the moment to take stock of best practices and shore up protections for consumers worldwide.

Keywords: consumer law, consumer protection; comparative law; negative option; automatic renewal; subscription; subscription abuse; consumer contract; fitness check; international consumer law

Suggested Citation

Caruso, Kaitlin and Cox, Prentiss, Silence as Consumer Consent: Global Regulation of Negative Option Contracts (May 16, 2024). American University Law Review, Forthcoming, Minnesota Legal Studies Research Paper No. 24-21, Available at SSRN: https://ssrn.com/abstract=4830103

Kaitlin Caruso (Contact Author)

University of Maine - School of Law ( email )

300 Fore Street
Portland, ME 04101
United States

Prentiss Cox

University of Minnesota Law School ( email )

229 19th Avenue South
Minneapolis, MN 55455
United States
612 625 6810 (Phone)

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