When discussing compliance with Travel Clubs, I always advise them that what works today may lead to scrutiny tomorrow. As a consequence, it’s a good idea to review your advertising and consumer-facing documents from time to time. Now may be a good time for some spring cleaning:
“Up To” Savings Assertions
The Federal Trade Commission has broad authority to identify deceptive practices under Section 5 of the Federal Trade Commissions Act. Recently, the agency scrutinized savings claims – those that assert consumers can achieve a benefit of “up to” a certain amount. The resulting report compared how consumers perceive the savings claim and what the advertiser is actually promising. As expected, the consumer assumed the “best” result was typical, even when a disclosure was provided. The upshot – don’t be surprised if the FTC expects advertisers to substantiate that a majority of consumers are likely to achieve the maximum results promised under normal circumstances.
The Florida Attorney General is collecting $6.5M from a law book publisher that sold subscriptions with auto-renewals, without clear and conspicuous disclosures regarding the renewal terms. Auto-renewals, also referred to as negative options, have gotten a lot of scrutiny since the FTC’s report on the practice in 2009. Some seller of travel and discount buying club laws have specific provisions regarding renewals, but Travel Clubs should also make sure they comply with the following FTC guidelines when utilizing auto-renewals:
- Disclose the material terms of the offer in an understandable manner;
- Make the appearance of disclosures clear and conspicuous;
- Disclose material terms before consumers pay or incur a financial obligation;
- Obtain the consumer’s affirmative consent to the offer; and
- Do not impede the effective operation of promised cancellation procedures.