[Code of Federal Regulations]
[Title 16, Volume 1]
[Revised as of January 1, 2006]
From the U.S. Government Printing Office via GPO Access
[CITE: 16CFR425.1]

[Page 422-424]
 
                     TITLE 16--COMMERCIAL PRACTICES
 
                   CHAPTER I--FEDERAL TRADE COMMISSION
 
PART 425_USE OF PRENOTIFI CATION NEGATIVE OPTION PLANS--Table of Contents
 
Sec. 425.1  The rule.





    (a) In connection with the sale, offering for sale, or distribution 
of goods and merchandise in or affecting commerce, as ``commerce'' is 
defined in the Federal Trade Commission Act, it is an unfair or 
deceptive act or practice, for a seller in connection with the use of 
any negative option plan to fail to comply with the following 
requirements:
    (1) Promotional material shall clearly and conspicuously disclose 
the material terms of the plan, including:
    (i) That aspect of the plan under which the subscriber must notify 
the seller, in the manner provided for by the seller, if he does not 
wish to purchase the selection;
    (ii) Any obligation assumed by the subscriber to purchase a minimum 
quantity of merchandise;
    (iii) The right of a contract-complete subscriber to cancel his 
membership at any time;
    (iv) Whether billing charges will include an amount for postage and 
handling;
    (v) A disclosure indicating that the subscriber will be provided 
with at least ten (10) days in which to mail any form, contained in or 
accompanying an announcement identifying the selection, to the seller;
    (vi) A disclosure that the seller will credit the return of any 
selections sent to a subscriber, and guarantee to the Postal Service or 
the subscriber postage to return such selections to the seller when the 
announcement and form are not received by the subscriber in time to 
afford him at least ten (10) days in which to mail his form to the 
seller;
    (vii) The frequency with which the announcements and forms will be 
sent to the subscriber and the maximum number of announcements and forms 
which will be sent to him during a 12-month period.
    (2) Prior to sending any selection, the seller shall mail to its 
subscribers, within the time specified by paragraph (a)(3) of this 
section:
    (i) An announcement identifying the selection;
    (ii) A form, contained in or accompanying the announcement, clearly 
and conspicuously disclosing that the subscriber will receive the 
selection identified in the announcement unless he instructs the seller 
that he does not

[[Page 423]]

want the selection, designating a procedure by which the form may be 
used for the purpose of enabling the subscriber so to instruct the 
seller, and specifying either the return date or the mailing date.
    (3) The seller shall mail the announcement and form either at least 
twenty (20) days prior to the return date or at least fifteen (15) days 
prior to the mailing date, or provide a mailing date at least ten (10) 
days after receipt by the subscriber, provided, however, that whichever 
system the seller chooses for mailing the announcement and form, such 
system must provide the subscriber with at least ten (10) days in which 
to mail his form.
    (b) In connection with the sale or distribution of goods and 
merchandise in or affecting commerce, as ``commerce'' is defined in the 
Federal Trade Commission Act, it shall constitute an unfair or deceptive 
act or practice for a seller in connection with the use of any negative 
option plan to:
    (1) Refuse to credit, for the full invoiced amount thereof, the 
return of any selection sent to a subscriber, and to guarantee to the 
Postal Service or the subscriber postage adequate to return such 
selection to the seller, when:
    (i) The selection is sent to a subscriber whose form indicating that 
he does not want to receive the selection was received by the seller by 
the return date or was mailed by the subscriber by the mailing date;
    (ii) Such form is received by the seller after the return date, but 
has been mailed by the subscriber and postmarked at least 3 days prior 
to the return date;
    (iii) Prior to the date of shipment of such selection, the seller 
has received from a contract-complete subscriber, a written notice of 
cancellation of membership adequately identifying the subscriber; 
however, this provision is applicable only to the first selection sent 
to a canceling contract-complete subscriber after the seller has 
received written notice of cancellation. After the first selection 
shipment, all selection shipments thereafter are deemed to be unordered 
merchandise pursuant to section 3009 of the Postal Reorganization Act of 
1970, as adopted by the Federal Trade Commission in its public notice, 
dated September 11, 1970;
    (iv) The announcement and form are not received by the subscriber in 
time to afford him at least ten (10) days in which to mail his form.
    (2) Fail to notify a subscriber known by the seller to be within any 
of the circumstances set forth in paragraphs (b)(1)(i) through (iv) of 
this section, that if the subscriber elects, the subscriber may return 
the selection with return postage guaranteed and receive a credit to his 
account.
    (3) Refuse to ship within 4 weeks after receipt of an order 
merchandise due subscribers as introductory and bonus merchandise, 
unless the seller is unable to deliver the merchandise originally 
offered due to unanticipated circumstances beyond the seller's control 
and promptly makes a reasonably equivalent alternative offer. However, 
where the subscriber refuses to accept alternatively offered 
introductory merchandise, but instead insists upon termination of his 
membership due to the seller's failure to provide the subscriber with 
his originally requested introductory merchandise, or any portion 
thereof, the seller must comply with the subscriber's request for 
cancellation of membership, provided the subscriber returns to the 
seller any introductory merchandise which already may have been sent 
him.
    (4) Fail to terminate promptly the membership of a properly 
identified contract-complete subscriber upon his written request.
    (5) Ship, without the express consent of the subscriber, substituted 
merchandise for that ordered by the subscriber.
    (c) For the purposes of this part:
    (1) Negative option plan refers to a contractual plan or arrangement 
under which a seller periodically sends to subscribers an announcement 
which identifies merchandise (other than annual supplements to 
previously acquired merchandise) it proposes to send to subscribers to 
such plan, and the subscribers thereafter receive and are billed for the 
merchandise identified in each such announcement, unless by a date or 
within a time specified by the seller with respect to each such 
announcement the subscribers, in conformity with the provisions of such

[[Page 424]]

plan, instruct the seller not to send the identified merchandise.
    (2) Subscriber means any person who has agreed to receive the 
benefits of, and assume the obligations entailed in, membership in any 
negative option plan and whose membership in such negative option plan 
has been approved and accepted by the seller.
    (3) Contract-complete subscriber refers to a subscriber who has 
purchased the minimum quantity of merchandise required by the terms of 
membership in a negative option plan.
    (4) Promotional material refers to an advertisement containing or 
accompanying any device or material which a prospective subscriber sends 
to the seller to request acceptance or enrollment in a negative option 
plan.
    (5) Selection refers to the merchandise identified by a seller under 
any negative option plan as the merchandise which the subscriber will 
receive and be billed for, unless by the date, or within the period 
specified by the seller, the subscriber instructs the seller not to send 
such merchandise.
    (6) Announcement refers to any material sent by a seller using a 
negative option plan in which the selection is identified and offered to 
subscribers.
    (7) Form refers to any form which the subscriber returns to the 
seller to instruct the seller not to send the selection.
    (8) Return date refers to a date specified by a seller using a 
negative option plan as the date by which a form must be received by the 
seller to prevent shipment of the selection.
    (9) Mailing date refers to the time specified by a seller using a 
negative option plan as the time by or within which a form must be 
mailed by a subscriber to prevent shipment of the selection.

(38 Stat. 717, as amended; 15 U.S.C. 41-58)

[38 FR 4896; Feb. 22, 1973; 38 FR 6991, Mar. 15, 1973, as amended at 63 
FR 44562, Aug. 20, 1998]