Industry experts said the Restore Online Shoppers’ Confidence Act, passed in December, will protect some consumers by curbing dishonest practices, but it won’t affect most ethical marketers.
The law regulates the practice of “data pass,” or sharing a customer’s financial information with third-party or affiliate marketers after an initial online purchase.
Most industry experts said they back the law, and indicated it should help to curb underhanded practices.
“We supported the law as written,” said Jerry Cerasale, SVP of government affairs at the Direct Marketing Association. “We didn’t have any problems with [prohibiting data pass]; that kind of marketing is bad news.”
The law also limits the use of so-called “negative option” or “free-to-pay conversion” practices, addressing consumer complaints about free offers that become rolling subscription fees or monthly charges without customer consent. The practice of “negative option” is still allowed, but the law mandates more disclosure to consumers and easier ways for them to cancel an ongoing subscription or monthly sale, said Cerasale.
The Federal Trade Commission will enforce the law, and violators will be subject to fines of up to $10,000 per incident. States will also be allowed to prosecute violators within their borders.
Jennie Verduzco, director of compliance and chargebacks at Litle & Co., a transaction processing firm, said the law will only affect a few companies on her firm’s client list, and it should not impact revenue and sales.
“It impacted the way their websites were currently developed, how they were displaying the pages, and the data they were requesting,” explained Verduzco regarding those particular clients. “I don’t think merchants that want to be in business long-term have intentions of marketing any other way.”
Simon Buckingham, founder and CEO of Appitalism.com, an online store and social community, said the law may protect consumers, but it is fundamentally unnecessary because consumers know what agreements and services they are signing up for when they make a purchase. “Everything is a considered purchase these days — there’s no more impulse buying,” said Buckingham.
Danny DeMichele, managing director at LSF Interactive, a search engine marketing company, said the law will have negative consequences for aggressive affiliate marketers that engage in deceptive marketing practices. However, it may also affect legitimate firms that partner with other companies to manage transactions. Companies that make money on the up-sell will also take a financial hit, said DeMichele.
“In a lot of cases, the product is the loss leader. A merchant will make maybe a two-, three-, four- or five-point margin [on the initial product sale], and they’ll make all their money in the post-transaction up-sell,” he added.
DeMichele added this business model isn’t typically used by most reputable marketers, but the absence of those companies “could have a slight [negative] effect on paid search bidding,” since they won’t be willing to pay as much per click.