Negative option billing
Encyclopedia
Negative option billing is a business
practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing.
This is, for example, the model on which mail order
services, such as Columbia House
or book clubs
, and Bottom Line Books are structured.
Negative option billing can lead to problems if buyers do not fully understand the terms, or sellers do not accept a consumer's decision to decline a product. There is a class-action lawsuit against Scholastic Corporation by consumers who felt "harassed, deceived, intimidated, and threatened" when they tried to cancel membership.
, Parliament attempted to outlaw the practice in 1996 after a public outcry the previous year when most cable television
companies added a package of new specialty services to their lineups in this manner. This had previously been the standard manner of adding new channels to cable television service, but had not previously attracted the type of controversy that was raised by the 1995 channel launch, in part because the 1995 launch entailed a large number of channels which launched concurrently, whereas previous additions had only involved one or two channels at a time.
MP Roger Gallaway
introduced a private-member's bill in 1996 to ban the practice which passed first reading, but died on the order paper when the House was dissolved for the 1997 elections. It was raised again in 1999, and was passed. Michael Janigan of the Public Interest Advocacy Centre stated:
The Ontario government also outlawed the practice in July 2005. Ontario's regulations prohibiting negative option billing do not protect consumers from owing for goods or services that they have agreed to receive.
Business
A business is an organization engaged in the trade of goods, services, or both to consumers. Businesses are predominant in capitalist economies, where most of them are privately owned and administered to earn profit to increase the wealth of their owners. Businesses may also be not-for-profit...
practice in which goods or services are provided automatically, and the customer must either pay for the service or specifically decline it in advance of billing.
This is, for example, the model on which mail order
Mail order
Mail order is a term which describes the buying of goods or services by mail delivery. The buyer places an order for the desired products with the merchant through some remote method such as through a telephone call or web site. Then, the products are delivered to the customer...
services, such as Columbia House
Columbia House
The Columbia House brand was introduced in the early 1970s by the Columbia Records division of CBS, Inc. as an umbrella for its mail-order music clubs, the primary incarnation of which was the Columbia Record Club, established in 1955. It had a significant market presence in the 1980s and early...
or book clubs
Book sales club
A book sales club is a subscription-based method of selling and purchasing books. It is more often called simply a book club, a term that is also used to describe a book discussion club, which can cause confusion.-How book sales clubs work:...
, and Bottom Line Books are structured.
Negative option billing can lead to problems if buyers do not fully understand the terms, or sellers do not accept a consumer's decision to decline a product. There is a class-action lawsuit against Scholastic Corporation by consumers who felt "harassed, deceived, intimidated, and threatened" when they tried to cancel membership.
Canadian law
In CanadaCanada
Canada is a North American country consisting of ten provinces and three territories. Located in the northern part of the continent, it extends from the Atlantic Ocean in the east to the Pacific Ocean in the west, and northward into the Arctic Ocean...
, Parliament attempted to outlaw the practice in 1996 after a public outcry the previous year when most cable television
Cable television
Cable television is a system of providing television programs to consumers via radio frequency signals transmitted to televisions through coaxial cables or digital light pulses through fixed optical fibers located on the subscriber's property, much like the over-the-air method used in traditional...
companies added a package of new specialty services to their lineups in this manner. This had previously been the standard manner of adding new channels to cable television service, but had not previously attracted the type of controversy that was raised by the 1995 channel launch, in part because the 1995 launch entailed a large number of channels which launched concurrently, whereas previous additions had only involved one or two channels at a time.
MP Roger Gallaway
Roger Gallaway
Roger John Gallaway, PC is an educator and retired Canadian politician. He was a member of the Canadian House of Commons from 1993 to 2006, representing the riding of Sarnia—Lambton for the Liberal Party....
introduced a private-member's bill in 1996 to ban the practice which passed first reading, but died on the order paper when the House was dissolved for the 1997 elections. It was raised again in 1999, and was passed. Michael Janigan of the Public Interest Advocacy Centre stated:
The concern associated with the practice of negative option billing has its origins in the nature of a contractContractA contract is an agreement entered into by two parties or more with the intention of creating a legal obligation, which may have elements in writing. Contracts can be made orally. The remedy for breach of contract can be "damages" or compensation of money. In equity, the remedy can be specific...
of purchase and sale, as recognized in common lawCommon lawCommon law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
. As every first year law student learns, such a contract consists of an offer and an acceptanceOffer and acceptanceOffer and acceptance analysis is a traditional approach in contract law used to determine whether an agreement exists between two parties. Agreement consists of an offer by an indication of one person to another of the offeror's willingness to enter into a contract on certain terms without...
. The history of consumer protection statuteStatuteA statute is a formal written enactment of a legislative authority that governs a state, city, or county. Typically, statutes command or prohibit something, or declare policy. The word is often used to distinguish law made by legislative bodies from case law, decided by courts, and regulations...
s is a chronicle of legislators attempting to ensure that the offer is conveyed without misrepresentation by the vendor to a purchaser who has an opportunity to make an informed choice to accept or refuse the offer. This is because a contract that is made with a consumer who is unaware of key elements of the contract such as price, quantity and quality of the goods to be delivered is subversive of the efficiency of the market as a whole.
The Ontario government also outlawed the practice in July 2005. Ontario's regulations prohibiting negative option billing do not protect consumers from owing for goods or services that they have agreed to receive.