CDT Releases Draft Consumer Protection Guidelines for Online “Upselling” for Public Comment

Washington –The Center for Democracy & Technology released for public comment today a draft set of "best practices" for companies that engage in online subscription upselling.  Over the past several months, CDT has been consulting with consumer advocates and industry representatives to put together guidelines on this topic.  CDT is now seeking input from all interested parties until January 28, 2011.  Persons seeking to comment on the document should send comments to: [email protected].

Upselling is the practice of inducing customers to buy additional items, upgrades or other add-ons that they may not have initially considered.  Done right, upselling provides customers with additional options.  However, the practice can be easily abused, leading customers to buy things unintentionally or without full awareness of the cost.  CDT is creating the guidelines to show companies how to conduct upselling online in ways that both enhance the buying experience and protect consumers.

"A lot of consumers have been burned by deceptive upselling," said CDT President Leslie Harris.  "We are looking for public input to create a final document that will help companies to fairly market added services to consumers."

The Senate Commerce Committee under Chairman Jay Rockefeller (D-WV) held hearings focused on the practice of online subscription upselling and found a pattern of serious abuses by some companies.  The Committee published two reports on the topic.  Last week, the Senate unanimously passed legislation introduced by Sen. Rockefeller designed to address the problem.  Several state Attorneys General have also launched investigations into upselling practices and have obtained substantial settlements against a number of companies.

“I applaud the efforts of CDT to clean up a set of e-commerce marketing tactics that have been used to scam millions of American consumers.” Chairman Rockefeller said.  “My Committee’s investigation uncovered a billion dollar scam perpetuated by hundreds of legitimate websites that were using these tactics.  I took these findings seriously and introduced a bill to put an end to these tactics.  I’m glad to see CDT providing much-needed leadership on this issue for e-commerce companies.”

The upselling investigations have focused on allegations that some companies have used upselling tactics to exploit a consumer's expectations during the "checkout" process, after the decision to buy has been made but before the sale has been confirmed.  For example, a person may wish to buy a cookbook online.  Once the credit card information is entered, but before the confirmation process takes place, the buyer might be offered a subscription to a monthly recipe club via a series of confusing "Yes" and "Continue" buttons that the consumer might reasonably believe are part of the final checkout process for the cookbook instead of an offer to enter into a financial relationship for a separate product or service.  Often these deals are with a third party partner distinct from the entity the consumer thought she was dealing with.  In some instances, the consumer's credit card information may be automatically transferred to the third party partner.  In other instances, the consumer may be subscribed to a "30 day free trial" membership but isn't made aware that, when the free trial ends, a monthly paid subscription service starts.  

The draft guidelines are the product of a CDT-led working group consisting of consumer advocates such as the National Consumers League and industry representatives such as Intelius.  The guidelines presently contain recommendations in three general areas: marketing, financial data transfer, and service of upsold subscriptions.  Among other “best practices,” the draft guidelines recommend that a refund process be offered on all "upsold" subscriptions, giving consumers 60 days to obtain full refunds if they complain they didn't knowingly sign up for the service.  Another recommendation is that, for "upsold" subscriptions that convert automatically from free to paid, the subscription upseller should send a confirming email to the consumer before the first charge is billed at the end of the free trial period.

The working group will hold a meeting in February to incorporate the public comments into the final version of the best practices document, which CDT intends to release early next year.

A copy of the draft guidelines can be found online here.