Continuing with its aggressive enforcement of negative option marketing, the Federal Trade Commission (FTC) announced a $35 million settlement with online digital photo and video platform Shutterstock to resolve allegations that Shutterstock violated Section 5 of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA) in connection with its subscription services. The FTC alleged that Shutterstock failed to disclose material terms before billing, charged consumers for products without their informed consent, and made cancellation difficult.
Shutterstock offers consumers several plans for licensing content on its website, varying in price and in the number of downloads available. The complaint alleges that Shutterstock offered most of its content through online subscriptions since at least 2020.
Link to FTC Focus on Negative Option Marketing FTC Focus on Negative Option Marketing
The FTC challenges Shutterstock’s disclosures and cancellation flows associated with recurring subscription products and on-demand content packs. Among other allegations, the FTC asserts that Shutterstock:
- Failed to clearly and conspicuously disclose material terms associated with automatically renewing subscriptions and certain “free trial” offers before obtaining consumers’ billing information, including recurring charges, annual commitments, and cancellation obligations
- Marketed certain on-demand image and content packs as suitable for “one-time” use and “no commitment,” while allegedly structuring those offerings to automatically charge consumers when the last download of the pack was used, and until early 2024, to automatically renew after one year regardless of whether all downloads were used
- Failed to adequately disclose that consumers canceling certain subscriptions before the end of the annual term could incur early cancellation fees, which allegedly varied from $29 to thousands of dollars based on the subscription
- Failed to obtain consumers’ express informed consent before charging them for recurring subscriptions and content packs
- Used cancellation flows that were allegedly more difficult than the enrollment process, including requiring some consumers to interact with customer service representatives to cancel rather than allowing immediate online cancellation
- Employed multistep retention and cancellation flows that the FTC alleges impeded consumers’ ability to terminate subscriptions
Link to Recurring Subscription Disclosure Requirements Recurring Subscription Disclosure Requirements
To resolve these allegations, the stipulated order between the FTC and Shutterstock requires Shutterstock to pay monetary relief to affected consumers. The stipulated order also imposes injunctive terms requiring Shutterstock to modify its subscription enrollment practices and prohibiting misrepresentations of any material fact about its subscriptions.
The injunction includes provisions now standard to FTC orders, including requiring the company to clearly disclose material terms of a transaction prior to obtaining a consumer’s billing information and obtain express, affirmative consent to the negative option feature offer.
Link to Cancellation Obligations Cancellation Obligations
Similarly, the injunction requires Shutterstock to provide a simple mechanism through the same medium the consumer used to sign up. The injunction specifies that this online cancellation mechanism must be “easy to find,” a requirement that the FTC, state attorneys general, and class action plaintiffs are increasingly challenging.
Link to Growing FTC and State Autorenewal Enforcement Growing FTC and State Autorenewal Enforcement
This settlement serves as yet another reminder that regulators continue to closely scrutinize subscription and autorenewal practices. In particular, the specific allegations in the complaint reflect the importance of carefully reviewing subscription enrollment flows, disclosures, consent mechanisms, and cancellation processes for compliance with federal and state autorenewal requirements.
The FTC has continued to prioritize enforcement in this area through actions brought under ROSCA and Section 5 of the FTC Act. Recent efforts include lawsuits against JustAnswer and Uber, as well as prior settlements involving negative option practices, such as the FTC’s $17 million resolution with Cleo AI last year.
Companies should also remain mindful that subscription programs may implicate a growing patchwork of state autorenewal laws, many of which impose differing disclosure, consent, reminder notice, and cancellation requirements that continue to evolve.
Contact the authors or Venable’s Autorenewal Solutions Team (VAST) with any questions.
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