Negative option billing

Negative option billing is a business practice in which a customer agrees to have goods or services to be 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, and other book clubs are structured.

In 15 states, as of 2006, unsolicited goods are deemed to be gifts with no obligation to pay for or return them. Contentious cases of negative option billing often center on unwitting solicitation lost in fine print and the difficulty of reversing a solicitation once made. An example is the class-action lawsuit against Scholastic Corporation by consumers who felt "harassed, deceived, intimidated, and threatened" when they tried to cancel membership.

In Canada, 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 concern associated with the practice of negative option billing has its origins in the nature of a contract of purchase and sale, as recognized in common law. As every first year law student learns, such a contract consists of an offer and an acceptance. The history of consumer protection statutes 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.

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