Obama Signs Rockefeller Internet Sales Practices Bill

December 29, 2010. President Obama signed into law S 3386 [LOC | WW], the "Restore Online Shoppers' Confidence Act". See, White House news office release.

Legislative History. Sen. John Rockefeller (D-WV) introduced this bill on May 19, 2010. See, story titled "Sen. Rockefeller Introduces Bill to Regulate Aggressive Sales Tactics on Internet" in TLJ Daily E-Mail Alert No. 2,086, May 21, 2010.

The SCC amended and approved it on June 19, 2010. See, story titled "Senate Commerce Committee Approves Bill to Regulate Aggressive Sales Tactics on Internet" in TLJ Daily E-Mail Alert No. 2,096, June 17, 2010.

Sen. Rockefeller discussed this bill in the Senate on November 18, 2010. See, story titled "Sen. Rockefeller Discusses His Bill to Regulate Internet Sales Practices" in TLJ Daily E-Mail Alert No. 2,162, November 22, 2010.

The House passed the bill on December 15, 2010. See, story titled "House Passes Rockefeller Internet Sales Practices Bill" in TLJ Daily E-Mail Alert No. 2,180, December 16, 2010.

Sen. Rockefeller has stated that the purpose of this bill is to prevent businesses from billing online consumers' credit and debit cards for things that they have not ordered.

Comparison to Section 5 of FTC Act. At the same time that this bill was being enacted into law, the Federal Trade Commission (FTC) used its "unfair or deceptive acts or practices" authority, under Section 5 of the FTC Act, which is codified at 15 U.S.C. § 45, to bring an action against numerous internet based businesses that charged consumers' credit and debit cards for things that they had not ordered. See, related story in this issue titled "FTC Files Complaint Alleging Unfair or Deceptive Online Billing Practices".

Section 5 of the FTC Act is a broad grant of authority, which does not reference internet sales, but which the FTC has successfully applied to internet sales practices. S 3386 gives the FTC specific authority with respect to certain internet sales practices.

S 3386 gives enforcement authority to the FTC. However, it also gives enforcement authority to the states. Section 5 of the FTC Act is enforced only by the FTC.

S 3386 regulates the use of negative option marketing on the internet. The FTC's just filed action alleges that the defendants' negative option marketing practices violated the FTC Act.

S 3386 also regulates transfers of credit or debit card information to any "post-transaction third party seller", and regulates the activities of these post-transaction third party sellers.

It provides that "It shall be unlawful for any post-transaction third party seller to charge or attempt to charge any consumer's credit card, debit card, bank account, or other financial account for any good or service sold in a transaction effected on the Internet, unless ... before obtaining the purchaser’s billing information, the post-transaction third party seller has clearly and conspicuously disclosed to the purchaser all material terms of the transaction ... and ... the post-transaction third party seller has received the express informed consent for the charge from the consumer whose credit card, debit card, bank account, or other financial account will be charged by ... obtaining from the consumer ... the full account number of the account to be charged; and ...the consumer's name and address and a means to contact the consumer; and ... requiring the consumer to perform an additional affirmative action, such as clicking on a confirmation button or checking a box that indicates the consumer’s consent to be charged the amount disclosed."

S 3386 also provides that "It shall be unlawful for an initial merchant to disclose a credit card, debit card, bank account, or other financial account number, or to disclose other billing information that is used to charge a customer of the initial merchant, to any post-transaction third party seller for use in an Internet-based sale of any goods or services from that post-transaction third party seller."

It also provides that "It shall be unlawful for any person to charge or attempt to charge any consumer for any goods or services sold in a transaction effected on the Internet through a negative option feature, unless ... before obtaining the purchaser’s initial agreement to participate in the negative option plan, the seller has clearly and conspicuously disclosed all material terms of the transaction ..."