Caruso and Cox article on subscription contract regulation

Given the pervasiveness of subscription contracts, regulation of such contracts has become a much more important consumer protection topic. And here is an article that tells us how to do that: Kaitlin Ainsworth Caruso of Maine and Prentiss Cox of Minnesota’s Silence as Consumer Consent: Global Regulation of Negative Option Contracts, American University Law Review, Forthcoming. Here’s the 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.

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