Continuity Program Guidelines

Continuity programs, and other sales arrangements under which a product is automatically shipped to the consumer each month where his or her credit card is automatically charged, are increasingly popular with electronic direct response marketers. Unlike conventional offers that offer only a single selling opportunity (not including back-end marketing), continuity programs provide marketers with a means to make a sales pitch only once, yet continue to sell to the same customer each month, sometimes indefinitely. Continuity programs are distinguishable from multiple payment plans, under which only one product is offered for sale, with payments spread out over an extended period.

Continuity programs are especially effective for consumable products, which lend themselves naturally to repeat purchases. For example, health and beauty products (e.g., shampoos and vitamins), and other products that consumers use daily are ideal for continuity sales. Many other types of products, however, ranging from diet and exercise programs with monthly motivational tapes, to educational products with monthly instructional materials, are beginning to be sold through continuity programs.

Unfortunately, together with the success of legitimate continuity programs, there have been instances of abuse and fraud. In response to consumer complaints about being unknowingly enrolled in continuity programs, the Federal Trade Commission ("FTC") has articulated basic standards for continuity programs. Based on FTC enforcement action in this area, ERA has compiled these Guidelines for Continuity Programs in an effort to safeguard the interests of both consumers and marketers in this increasingly popular and important marketing practice.

ADVISORY GUIDELINES

A. Consumers must have a clear understanding of their rights and obligations before they enter into a continuity program.
The FTC has enumerated several crucial terms and conditions that should be clearly understood by the consumer before he or she can agree to enter a continuity program. Specifically, the consumer must give his or her "expressed consent" (silence cannot be construed as expressed consent) to the material terms and conditions of the program, which the marketer must convey to the consumer prior to taking an order. Specifically, the following terms must be conveyed to the consumer:

1. The fact that automatic shipment of the product will be made without further action by the consumer;
2. A description of the product included in each shipment;
3. The approximate interval between each shipment;
4. A description of the billing procedure, including the total cost to be charged to the consumer's credit card each month;
5. The minimum number of purchases required, if any; and
6. A description of the terms and conditions, and the procedures by which subscribers may cancel further shipments.

B. The terms and conditions of the continuity program must be disclosed to the consumer in a specific manner.
For any sale initiated or completed by telephone (i.e., when a consumer calls an in-bound operator after viewing a DRTV commercial or Website advertisement), the above terms should be provided by the operator in clear and understandable language, before credit card information is taken. For the benefit of both marketers and consumers, these terms should be written into the telemarketing script, not only to ensure that the consumer hears and understands them, but also to provide evidence that the marketer has provided the information.

In addition, for any continuity program offered through a television or radio advertisement, the following terms and conditions (in addition to the terms and conditions which must be disclosed by the in-bound operator) must be disclosed on screen in a clear and prominent superscript and/or with a voice-over recitation during the presentation of ordering instructions for the product:

1. that the product must be purchased through a continuity program and shipment of the product will be made without further action by the consumer, if such is the case, and
2. the minimum number of purchases under the continuity program, if any.

For any solicitation by print advertisement or direct mail, the terms and conditions set-forth in Section A must be disclosed in a clear and prominent manner in close proximity to the ordering instructions. If the advertisement contains an order form or coupon on a separate page or document from the advertising material, these terms must be disclosed in both the advertisement and in the order form or coupon.

If a continuity program is offered on a Website, the terms and conditions set forth in Section A must be disclosed in a clear and prominent manner in close proximity to the ordering instructions before credit card information is taken. Online advertisers are encouraged to utilize the unique technological features that distinguish the Internet from other media to make these disclosures easy to find, easy to read, and easy to understand.

C. Program members should receive a separate written statement which repeats the terms and conditions of the program.
Customers should also receive a separate written statement, either included with the first product shipment or sent by first-class mail-or by e-mail, if the product was ordered online or the consumer provided an e-mail address for this purpose-describing, at a minimum, the conditions and terms of the continuity program (including those terms listed in Section A), as well as how the consumer can cancel further shipments. If the statement is sent via first-class-or by e-mail, if the product was ordered online or the consumer provided an e-mail address for this purpose-mail, it should be sent at least 14 days before the second shipment is to be mailed to the consumer. In either case, the consumer must have at least 14 days to cancel participation in the program and avoid being charged for the second shipment.

D. Program members must be provided with a means to cancel their participation in the continuity program with each shipment.
With each subsequent shipment, the consumer must receive a clear description of how to cancel further shipments. This description should include a telephone number (preferably toll free), an e-mail address, or a street address or post office box to which the consumer can write, preferably with a postage paid mailer, in order to notify the seller of his or her cancellation. However, if the program has a minimum number of purchases required to fulfill the obligation of the consumer, the marketer does not need to send this notice, except with the last shipment of any minimum purchase requirement.

E. Once the consumer notifies the marketer of his or her cancellation, the marketer must cease shipment and billing immediately.
If, for any reason, the consumer acts on his or her right to cancel, the marketer must cancel the consumer's membership immediately. The consumer has the right to return, for a full refund, any product(s) that have been shipped after the marketer receives notice of the customer's cancellation.