IFA Testifies At FTC Hearing On Negative Option Rule

Franchise Relations

“The flawed rulemaking approach at issue with the Negative Option Rule appears pervasive throughout the FTC’s recent rulemaking practices”

WASHINGTON – Today, Sarah Davies, General Counsel of the International Franchise Association (IFA) testified at an informal hearing of the Federal Trade Commission (FTC) on proposed amendments to the Negative Option Rule.

“Negative options” involves a category of commercial transactions where subscriptions will automatically continue or renew unless the consumer takes an affirmative action to prevent it from continuing or renewing. Should the FTC finalize its Negative Option Rule, it would impose new regulations and obligations on many franchise businesses, such as fitness, preventative healthcare and personal wellness services, and children’s extracurricular activities.

Davies emphasized that, “IFA was notably troubled that the leading nature of the questions posed in the RFI will yield incomplete and anecdotal accounts of franchise relationships rather than a holistic picture of franchising as it exists today. The flawed rulemaking approach at issue with the Negative Option Rule appears pervasive throughout the FTC’s recent rulemaking practices. We believe the Commission must engage with facts and avoid making rules for the exception.”

Other key excerpts from the testimony include:

“IFA and its members believe in honest business practices, with clear and conspicuous disclosures, informed consent, and cancellation that is not difficult or impossible.”

“Negative option marketing provides an enormous benefit to both consumers and small businesses, including convenience and time savings, a streamlined transaction experience, and lower costs. A whole host of companies offer recurring billing to consumers, without incident.”

“2023 saw several FTC rulemakings that threaten the franchise model as well as a Request for Information regarding common franchise agreement provisions and franchisor business practices at a time when the FTC Franchise Rule governing presale disclosures is in desperate need of updating, yet the Franchise Rule review has remained seemingly dormant since 2020. “

After the FTC announced its rulemaking proposal in March 2023, IFA was one of six commenters who requested to present their positions at an informal hearing.

A transcript of Davies’ full testimony is available here.

About The International Franchise Association:

Celebrating over 60 years of excellence, education, and advocacy, the International Franchise Association (IFA) is the world’s oldest and largest organization representing franchising worldwide. IFA works through its government relations and public policy, media relations, and educational programs to protect, enhance and promote franchising and the approximately 790,492 franchise establishments that support nearly 8.4 million direct jobs, $825.4 billion of economic output for the U.S. economy, and almost 3 percent of the Gross Domestic Product (GDP). IFA members include franchise companies in over 300 different business format categories, individual franchisees, and companies that support the industry in marketing, law, technology, and business development.

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