$10 million ABCmouse settlement: Avoiding auto-renewal traps

Deceptive advertising from ABC Mouse

By Andrew Smith, Director, FTC Bureau of Consumer Protection

Online subscription services can be a convenience for consumers and a boon for business – especially now that so many people are shopping from home.

But under the law, companies have an obligation to explain the details of the deal up front, clearly disclose any automatic renewal terms, get consumers’ express consent before billing, and offer simple ways to cancel.

The FTC just announced a $10 million settlement with online learning company ABCmouse for allegedly violating those established consumer protection principles. 

The case offers lessons for subscription-based businesses about the perils of snaring customers in a negative option trap.

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