H.R. 5707 – Reading Mode

111th CONGRESS

2d Session

H. R. 5707

IN THE HOUSE OF REPRESENTATIVES

July 1, 2010

Mr. Space introduced the following bill; which was referred to the Committee on Energy and Commerce

A BILL

To protect consumers from certain aggressive sales tactics on the Internet.

Short title

This Act may be cited as the Restore Online Shoppers’ Confidence Act.

Findings; declaration of policy

The Congress finds the following:

(1)

The Internet has become an important channel of commerce in the United States, accounting for billions of dollars in retail sales every year. Over half of all American adults have now either made an online purchase or an online travel reservation.

(2)

Consumer confidence is essential to the growth of online commerce. To continue its development as a marketplace, the Internet must provide consumers with clear, accurate information and give sellers an opportunity to fairly compete with one another for consumers’ business.

(3)

An investigation by the Senate Committee on Commerce, Science, and Transportation found abundant evidence that the aggressive sales tactics many companies use against their online customers have undermined consumer confidence in the Internet and thereby harmed the American economy.

(4)

The Committee showed that, in exchange for bounties and other payments, hundreds of reputable online retailers and Web sites shared their customers’ billing information, including credit card and debit card numbers, with third party sellers through a process known as data pass. These third party sellers in turn used aggressive, misleading sales tactics to charge millions of American consumers for membership clubs the consumers did not want.

(5)

Third party sellers offered membership clubs to consumers as they were in the process of completing their initial transactions on hundreds of Web sites. These third party post-transaction offers were designed to make consumers think the offers were part of the initial purchase, rather than a new transaction with a new seller.

(6)

Third party sellers charged millions of consumers for membership clubs without ever obtaining consumers’ billing information, including their credit or debit card information, directly from the consumers. Because third party sellers acquired consumers’ billing information from the initial merchant through data pass, millions of consumers were unaware they had been enrolled in membership clubs.

(7)

The use of a data pass process defied consumers’ expectations that they could only be charged for a good or a service if they submitted their billing information, including their complete credit or debit card numbers.

(8)

Third party sellers used a free trial period to enroll members, after which they periodically charged consumers until consumers affirmatively canceled the memberships. This use of free-to-pay conversion and negative option sales took advantage of consumers’ expectations that they would have an opportunity to accept or reject the membership club offer at the end of the trial period.

Prohibitions against certain unfair and deceptive internet sales practices

(a)

Requirements for Certain Internet-Based Sales

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—

(1)

before obtaining the consumer’s billing information, the post-transaction third party seller has clearly and conspicuously disclosed to the consumer all material terms of the transaction, including—

(A)

a description of the goods or services being offered;

(B)

the fact that the post-transaction third party seller is not affiliated with the initial merchant, which may include disclosure of the name of the post-transaction third party in a manner that clearly differentiates the post-transaction third party seller from the initial merchant; and

(C)

the cost of such goods or services; and

(2)

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—

(A)

obtaining from the consumer—

(i)

the full account number of the account to be charged; and

(ii)

the consumer’s name and address and a means to contact the consumer; and

(B)

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.

(b)

Prohibition on data-Pass used To facilitate certain deceptive Internet sales transactions

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.

(c)

Limitations on use of negative option feature in Internet-Based sales transactions

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—

(1)

before obtaining the consumer’s initial agreement to participate, the seller has clearly and conspicuously disclosed all material terms of the transaction, including—

(A)

the name of the entity offering the goods or services;

(B)

a description of the goods or services being offered;

(C)

the cost of such goods or services;

(D)

notice of when billing will begin and at what intervals the charges will occur;

(E)

the length of any trial period;

(F)

a statement that the consumer’s account will be charged unless the consumer takes affirmative action and the steps the consumer must take to the avoid the charge; and

(G)

instructions for stopping the recurring charges in accordance with the requirements of paragraph (3);

(2)

the seller has obtained the express informed consent described in subsection (a)(2) from the consumer before charging or attempting to charge the consumer’s credit card, debit card, bank account, or other financial account on a recurring basis; and

(3)

the seller enables the consumer to stop recurring charges from being made to the consumer’s credit card, debit card, bank account, or other financial account through a simple process that is available via the Internet and email.

(d)

Application with other law

Nothing in this Act shall be construed to supersede, modify, or otherwise affect the requirements of the Electronic Fund Transfer Act (15 U.S.C. 1693 et seq.) or any regulation promulgated thereunder.

(e)

Definitions

In this section:

(1)

Initial merchant

The term initial merchant means a person that has obtained a consumer’s billing information directly from the consumer through an Internet transaction initiated by the consumer.

(2)

Negative option feature

The term negative option feature has the meaning given that term in section 310.2(t) of the Federal Trade Commission’s Telemarketing Sales Rule regulations (16 C.F.R. 310.2(t)).

(3)

Post-transaction third party seller

The term post-transaction third party seller means a person that—

(A)

sells, or offers for sale, any good or service on the Internet;

(B)

solicits the purchase of such goods or services on the Internet through an initial merchant after the consumer has initiated a transaction with the initial merchant; and

(C)

is not a subsidiary or corporate affiliate of the initial merchant.

Enforcement by Federal Trade Commission

(a)

In general

Violation of this Act or any regulation prescribed under this Act shall be treated as a violation of a rule under section 18 of the Federal Trade Commission Act (15 U.S.C. 57a) regarding unfair or deceptive acts or practices. The Federal Trade Commission shall enforce this Act in the same manner, by the same means, and with the same jurisdiction, powers, and duties as though all applicable terms and provisions of the Federal Trade Commission Act (15 U.S.C. 41 et seq.) were incorporated into and made a part of this Act.

(b)

Regulations

Notwithstanding any other provision of law, the Commission may promulgate such regulations as it finds necessary or appropriate to carry out this Act under section 553 of title 5, United States Code.

(c)

Penalties

Any person who violates this Act or any regulation prescribed under this Act shall be subject to the penalties and entitled to the privileges and immunities provided in the Federal Trade Commission Act as though all applicable terms and provisions of the Federal Trade Commission Act were incorporated in and made part of this Act.

(d)

Authority Preserved

Nothing in this section shall be construed to limit the authority of the Commission under any other provision of law.

Enforcement by State attorneys general

(a)

Right of action

Except as provided in subsection (e), the attorney general of a State, or other authorized State officer, alleging a violation of this Act or any regulation issued under this Act that affects or may affect such State or its residents may bring an action, as parens patriae, on behalf of the residents of the State in any United States district court for the district in which the defendant is found, resides, or transacts business, or wherever venue is proper under section 1391 of title 28, United States Code, to enjoin further violation, to compel compliance with this Act and any regulation issued under this Act, to obtain damages, restitution, or other compensation on behalf of residents of such State, or to obtain such further and other relief as the court may deem appropriate.

(b)

Notice to Commission required

A State shall provide prior written notice to the Federal Trade Commission of any civil action under subsection (a) together with a copy of its complaint, except that if it is not feasible for the State to provide such prior notice, the State shall provide such notice immediately upon instituting such action.

(c)

Intervention by the Commission

The Commission may intervene in such civil action and upon intervening may—

(1)

be heard on all matters arising in such civil action; and

(2)

file petitions for appeal of a decision in such civil action.

(d)

Construction

Nothing in this section shall be construed—

(1)

to prevent the attorney general of a State, or other authorized State officer, from exercising the powers conferred on the attorney general, or other authorized State officer, by the laws of such State; or

(2)

to prohibit the attorney general of a State, or other authorized State officer, from proceeding in State or Federal court on the basis of an alleged violation of any civil or criminal statute of that State.

(e)

Limitation

Whenever a civil action has been instituted by or on behalf of the Federal Trade Commission for violation of this Act or any regulation prescribed under this Act, no State may, during the pendency of such action instituted by or on behalf of the Commission, institute a civil action under subsection (a) of this section against any defendant named in the complaint in such action for violation of this Act or any regulation prescribed under this Act as alleged in such complaint.