The Federal Trade Commission is working on rules to protect consumers from predatory online subscriptions — those surprise recurring payments that pop on your monthly credit card bill that you can’t quite remember signing up for and don’t know how to cancel. Anyone who’s ever been scammed by an online “free trial” offer — only to find out that canceling costs you hours on hold with an overseas call center — knows what I’m talking about.
But, as with any regulation, the key is to zero-in on the target without creating many unintended consequences. After all, there’s nothing inherently bad or deceptive about subscription-based businesses. In fact, many consumers would agree that automatic payments for recurring services are a huge convenience.
Some subscription services — such as your home internet service or your monthly cell phone plan — are so vital to your daily existence that you’d probably scream in frustration if you had to proactively remember to re-up every month.
A smart, surgical approach to consumer protection will recognize the difference between scams and essential services. Right now, though, the FTC’s proposal confuses these two categories — which could hurt consumers.
The commission’s guiding principle in this rulemaking — “it should be as easy to cancel a subscription as it is to sign up” — is a great slogan but doesn’t always translate neatly in the real world. Canceling a Spotify subscription in a couple of clicks may be simple enough. But if you’re looking to cancel or modify a more complicated service — for example, a package deal of phone, pay-TV and broadband service bundled in one subscription through the same provider — then rules limiting companies’ ability to assist you through that process could do more harm than good.
For example, the FTC’s proposed rules could prohibit phone and internet providers from warning customers how canceling a bundled service might affect their 911 access. Providers could be penalized for offering that customer new discounts or special pricing as an alternative to canceling. In the name of “protecting” consumers, FTC regulations would shield them from learning about potentially better deals.
Smart rules that go after bad actors would help consumers. But blunt rules that create more headaches than they solve will earn poor marks from consumers (and voters).
The smart approach argues for focusing specifically on industries with clear track records of predatory subscription practices. Gyms and health clubs, for example, are notorious for offering easy online sign-ups while requiring immensely inconvenient in-person cancellations. Digital news sites are among the worst offenders of luring readers into hard-to-cancel recurring subscriptions when all they really want is access to one article. The FTC should start with this low-hanging fruit while building a record to identify other sectors deserving more scrutiny.
The commission could start by focusing on industry segments that are not already covered by a heavy blanket of consumer protection rules policed by other state and federal agencies. The FTC’s mandate here should be to clean up the Wild West of the unregulated digital economy — not to wrap another layer of bureaucratic red tape around already well-regulated companies.
Keying in on industries rife with predatory subscription models would also put the commission’s rules on a much stronger legal footing heading into inevitable court challenges. Under the law, the FTC has to identify “with specificity” which unfair acts and practices its rules intend to target. Overly broad, vague definitions may not pass muster in judges’ eyes — a significant concern, given the FTC’s recent track record of high-profile losses in court.
Consumers have much to gain from smart, carefully tailored federal rules prohibiting abusive, exploitative billing practices online. But no one wins — aside from the law firms salivating over subsequent legal challenges — if the FTC squanders this opportunity by pushing rules that only add more confusion, frustration and red tape to consumers’ online experiences.
Commissioners should focus on the real problem instead of trying to remake the entire digital economy in one swoop.
