Repeat customers spend 67% more than new customers, making subscription models one of the most effective strategies for driving sustainable business growth. Subscriptions reduce friction in the buying experience and, by delivering products or services on a recurring basis, create a predictable and scalable experience. The rise of subscription-based selling has been dramatic, with Americans now spending an average of $924 per year on subscriptions.
As the subscription economy has expanded, regulatory scrutiny of how businesses handle opt-in and opt-out practices has increased. The US Federal Trade Commission and other regulators issued specific guidance governing subscription marketing, and a recent enforcement action by the Attorney General of Pennsylvania put standards to the test.
Negative Option Marketing: A Poor Choice for Coin Collecting
The Pennsylvania Attorney General’s Office received over 200 consumer complaints against American Mint, a collectibles company near Harrisburg, PA. The investigation showed that American Mint enrolled customers in a recurring “negative option” subscription plan without their explicit consent. According to the FTC, negative option plans are those in which a customer’s failure to affirmatively opt out is treated as agreement to future purchases; the agency considers such practices harmful if they are not adequately disclosed, consumers are billed for services they didn’t agree to, or cancellation is difficult or impossible.
The Pennsylvania Attorney General alleged violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law, arguing that American Mint had enrolled customers in coin subscription programs with no substantive way to opt out. The case was resolved with a $750,000 damages payment, a requirement to discharge outstanding consumer debts, and changes to the company’s business practices.
Consumer Survey Research in Legal and Regulatory Disputes
In disputes over allegedly deceptive marketing communications and disclosures, consumer perception surveys are a common tool. Consumer perception surveys measure how consumers interpret advertising claims, offers, and subscription terms. They are especially useful in measuring the understanding of terms like “free,” “trial,” or “limited offer,”; and how that understanding influences consumer purchasing decisions.
False or deceptive advertising surveys can measure the messages consumers actually take away from an ad or offer, while materiality surveys measure whether those messages were likely to influence purchasing decisions. Where trademark rights are also at issue, secondary meaning surveys can measure whether consumers associate a particular mark or trade dress with a single source, and likelihood-of-confusion surveys assess whether similar marks are likely to mislead consumers.
IMS Legal Strategies is trusted by regulators, including the FTC and the DOJ, to design and conduct consumer survey research supporting private sector and public enforcement. Our Litigation Surveys & Consumer Science team has supported counsel across thousands of matters before federal and state courts, the U.S. Trademark Trial and Appeal Board, and the BBB National Programs’ National Advertising Division (NAD), delivering reliable expert testimony that meets rigorous legal and social science standards.
