New Limits on Online Marketing: The Implications for Nonprofit Organizations

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Many nonprofit organizations that market online may rely upon recurring charges for enrollment in membership offers, and other subscription programs, as well as online processing of payment transactions. But now, online advertisers, marketers and merchants will have to comply with a new set of requirements under the “Restore Online Shoppers' Confidence Act,” S. 3386 (the “Act”). The Act was signed into law by President Obama on December 29, 2010. As a result, nonprofit organizations with online sales – especially ones with third party marketing relationships or that sell "continuity" programs (e.g., recurring periodic billing) – will need to review their online activities carefully under the new law to ensure compliance.

Overview

The Act was championed by Senator Jay Rockefeller (D-WV) and the Federal Trade Commission (the “FTC”) as a means to combat allegedly deceptive online sales tactics that resulted in recurring charges for consumers for membership clubs and other continuity programs. The Act addresses online “data-pass” of billing information to post-transaction sellers, imposes requirements for obtaining billing information, and restricts the use of negative-option marketing. The obligations in the Act are on top of rules that credit card associations and payment processors already have in place relative to online transactions.

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