U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

1 

89–010 

" ! SENATE 

111TH CONGRESS

2d Session 

REPORT

2010

111–240 

Calendar No. 500 

RESTORE ONLINE SHOPPERS’ CONFIDENCE 

ACT 

R E P O R T 

OF THE

COMMITTEE ON COMMERCE, SCIENCE, AND 

TRANSPORTATION 

ON

S. 3386 

AUGUST 2, 2010.—Ordered to be printed 


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SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION 

ONE HUNDRED ELEVENTH CONGRESS

SECOND SESSION

JOHN D. ROCKEFELLER IV, West Virginia, Chairman 

DANIEL K. INOUYE, Hawaii 

JOHN F. KERRY, Massachusetts 

BYRON L. DORGAN, North Dakota 

BARBARA BOXER, California 

BILL NELSON, Florida 

MARIA CANTWELL, Washington 

FRANK R. LAUTENBERG, New Jersey 

MARK PRYOR, Arkansas 

CLAIRE MCCASKILL, Missouri 

AMY KLOBUCHAR, Minnesota 

TOM UDALL, New Mexico 

MARK WARNER, Virginia 

MARK BEGICH, Alaska 

KAY BAILEY HUTCHISON, Texas 

OLYMPIA J. SNOWE, Maine 

JOHN ENSIGN, Nevada 

JIM DEMINT, South Carolina 

JOHN THUNE, South Dakota 

ROGER F. WICKER, Mississippi 

GEORGE S. LEMIEUX, Florida 

JOHNNY ISAKSON, Georgia 

DAVID VITTER, Louisiana 

SAM BROWNBACK, Kansas 

MIKE JOHANNS, Nebraska 

ELLEN DONESKI, Staff Director 

JAMES REID, Deputy Staff Director 

BRUCE ANDREWS, General Counsel 

ANN BEGEMAN, Republican Staff Director 

BRIAN HENDRICKS, Republican General Counsel 

TODD BERTOSON, Republican Senior Counsel 


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Calendar No. 500 

111TH CONGRESS REPORT " ! SENATE 2d Session 111–240 

RESTORE ONLINE SHOPPERS’ CONFIDENCE ACT 

AUGUST 2, 2010.—Ordered to be printed 

Mr. ROCKEFELLER, from the Committee on Commerce, Science, and 

Transportation, submitted the following 

R E P O R T 

[To accompany S. 3386] 

The Committee on Commerce, Science, and Transportation, to 

which was referred the bill (S. 3386) to protect consumers from certain aggressive sales tactics on the Internet, having considered the 

same, reports favorably thereon with an amendment (in the nature 

of a substitute) and recommends that the bill (as amended) do 

pass. 

PURPOSE OF THE BILL

S. 3386, as amended, would protect online consumers from unfair 

and deceptive sales tactics on the Internet by (1) requiring e-commerce companies that advertise on other companies’ websites to 

meet certain requirements before charging consumers’ financial accounts, (2) prohibiting e-commerce companies from transferring 

their customers’ billing information to the e-commerce companies 

that are advertising on their websites, and (3) requiring e-commerce companies that use ‘‘negative options’’ to meet certain minimum requirements. 

BACKGROUND AND NEEDS

In the past 15 years, the Internet has rapidly grown from an entertaining diversion to an integral part of the daily life of millions 

of Americans. According to research done by the Pew Internet and 

American Life Project, over half of all American adults had either 

made an online purchase or an online travel reservation by 2008. 

Yet large percentages of online consumers continue to report that 

they feel frustrated, overwhelmed, or confused by online shopping. 


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A key factor contributing to consumers’ lingering unease about 

online shopping is the aggressive sales tactics that many companies have used against their customers. In response, in May 2009, 

the Committee opened an investigation into a set of online sales 

tactics that many consumers, law enforcement officials, and consumer advocates described as misleading and deceptive. The yearlong investigation found that hundreds of legitimate, respected 

websites had shared their customers’ billing information through a 

‘‘data pass’’ process with other companies (defined as ‘‘post-transaction third party sellers’’ in S. 3386). These post-transaction third 

party sellers then enrolled online consumers in their membership 

programs more than 35 million times, charging them over $1.4 billion in fees for benefits and services they were often unaware they 

had purchased. 

The post-transaction third party sellers and the websites they 

partnered with used a combination of three aggressive sales tactics 

to enroll consumers in their membership clubs and discount programs: post-transaction marketing, data pass, and negative options. 

Post-Transaction Marketing: Offers for membership clubs 

were presented to online consumers as they were completing their 

purchases on familiar retailers’ websites. After consumers entered 

their billing information into a ‘‘check out’’ purchase page on familiar e-retailers’ sites, but before they completed confirmation of the 

transaction, the unfamiliar post-transaction third party sellers interrupted the process and attempted to enroll consumers in membership clubs. 

Data Pass: Consumers were not required to enter their billing 

information to be enrolled in the membership clubs offered by the 

post-transaction third party sellers. The websites on which the consumers had already made purchases were willing to share their 

customers’ billing information with the post-transaction third party 

sellers. Collectively, hundreds of well-known, reputable websites 

earned hundreds of millions of dollars by passing their customers’ 

billing information, including credit and debit card numbers, to 

third party sellers. 

Negative Options: Consumers enrolled in the membership 

clubs were automatically charged a recurring, monthly fee until 

they contacted the post-transaction third party seller to cancel the 

membership. Post-transaction third party sellers’ use of negative 

options cost American consumers hundreds of millions of dollars 

because they were enrolled in and charged for the membership 

clubs indefinitely, until they realized there was an unfamiliar 

charge on their credit card or debit card statements. 

Attached to this report are two Committee staff investigative reports which document how extensive the injuries to consumers 

were and how pervasive the tactics were on the Internet. The evidence obtained by the Committee demonstrated overwhelmingly 

that most consumers were unaware they were enrolled in the membership programs. 

During interviews with Committee staff and in Committee testimony, many affected consumers stated repeatedly that they were 

not aware they were consenting to allow a website to transfer their 

billing information to a post-transaction third party seller by simply clicking a button and providing their e-mail address. Many onVerDate Mar 15 2010 05:55 Aug 03, 2010 Jkt 089010 PO 00000 Frm 00004 Fmt 6659 Sfmt 6601 E:\HR\OC\SR240.XXX SR240

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line consumers informed Committee staff that they had mistakenly 

believed it was illegal for e-commerce companies to transfer their 

billing information to another company. 

Evidence obtained through the Committee’s investigation showed 

that the companies engaged in the practice were well aware that 

consumers did not understand this process. The companies exploited consumer confusion by using practices that caused consumers to unwittingly enroll in the companies’ services and programs. Annually, the post-transaction third party sellers received 

millions of calls from angry, frustrated consumers cancelling their 

memberships or asking questions about the charges to their credit 

or debit cards. When the companies tracked the reasons for these 

angry calls, the evidence overwhelmingly showed that consumers 

were being enrolled in the membership programs without their express informed consent. An employee of one company commented 

candidly in an internal e-mail that ‘‘at least 90% of our members 

don’t know anything about the membership.’’ 

SUMMARY OF PROVISIONS

To ensure online consumers are no longer taken advantage of by 

these questionable sales tactics, S. 3386 would create new rules for 

companies using post-transaction marketing and negative options. 

It would also prohibit e-commerce companies from using the socalled data pass process to pass their customers’ billing information 

to e-commerce companies engaging in post-transaction marketing 

on their websites. 

Post-transaction third party sellers would be required to meet 

certain requirements before charging a consumer for a good or 

service. The bill would require post-transaction third party sellers 

to disclose the material terms of the transaction and obtain the 

consumer’s express informed consent. The disclosure requirements 

include: 

• a description of the goods or services being offered; 

• the fact that the post-transaction third party is not affiliated with the initial merchant; and 

• the cost of such goods or services. 

For a post-transaction third party seller to obtain consumers’ express informed consent, consumers would need to provide their full 

sixteen digit credit card or debit card number, their name and address, and a means to contact them. The purpose of this provision 

is to require post-transaction third party sellers to go through the 

same process to charge consumers as initial merchants do. Evidence obtained through the Committee’s investigation shows that 

online consumers understand that they are making a purchase 

when they go through this process. The bill would also prohibit initial merchants from transferring their customers’ billing information to post-transaction third party sellers because initial merchants, like post-transaction third party sellers, should be held liable if they participate in a data pass process prohibited by the bill. 

The bill’s ‘‘negative option’’ provision would establish clear standards of disclosure and consent for sales that involve recurring 

charges. The practices outlined in this provision are already used 

by most legitimate e-commerce companies selling goods and services through negative option sales. All companies would be required 

to make certain disclosures, obtain consumers’ express informed 


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consent and provide the consumers with simple, convenient ways 

to cancel the ‘‘negative options’’ via the Internet or through e-mail. 

The disclosure requirements include: 

• the name and entity offering the goods or services; 

• a description of the goods or services; 

• the cost of such goods or services; 

• notice of when billing will begin and at what intervals the 

charges will occur; 

• the length of any trial period; and 

• instructions for stopping the recurring charges. 

The bill would provide the Federal Trade Commission with enforcement authority and the State Attorneys General with the 

power to seek injunctive relief in Federal court. 

LEGISLATIVE HISTORY

Senator Rockefeller introduced S. 3386 on May 19, 2010, and it 

was referred to the Committee on Commerce, Science, and Transportation. The bill was co-sponsored by Senators Pryor, Nelson, 

Klobuchar, McCaskill, and LeMieux. The bill was introduced following a November 17, 2009, investigative hearing entitled ‘‘Aggressive Sales Tactics on the Internet and Their Impact on American Consumers’’ and the release of two Committee staff reports on 

the subject. Each staff report is attached. On June 9, 2010, the 

Committee considered the bill during an open executive session 

and adopted it by voice vote. 

ESTIMATED COSTS

In accordance with paragraph 11(a) of rule XXVI of the Standing 

Rules of the Senate and section 403 of the Congressional Budget 

Act of 1974, the Committee provides the following cost estimate, 

prepared by the Congressional Budget Office: 

JULY 14, 2010. 

Hon. JOHN D. ROCKEFELLER IV, 

Chairman, Committee on Commerce, Science, and Transportation, 

U.S. Senate, Washington, DC. 

DEAR MR. CHAIRMAN: The Congressional Budget Office has prepared the enclosed cost estimate for S. 3386, the Restore Online 

Shoppers’ Confidence Act. 

If you wish further details on this estimate, we will be pleased 

to provide them. The CBO staff contacts are Alan Eder and Susan 

Willie. 

Sincerely, 

DOUGLAS W. ELMENDORF. 

Enclosure. 

S. 3386—Restore Online Shoppers’ Confidence Act 

Impact on the Federal Budget: S. 3386 would make it unlawful 

for any third-party seller to charge a consumer’s financial account 

after the sale of any good or service over the Internet unless certain requirements are met. The bill would define third-party sellers 

as vendors that offer a good or service to a consumer after the consumer has completed a transaction with a different Internet merchant. 


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Additionally, S. 3386 would make it unlawful for a person who 

has directly obtained a consumer’s billing information through an 

online transaction to disclose it to any third-party seller. Finally, 

the bill would require the Federal Trade Commission (FTC) to develop regulations necessary to enforce the new requirements and 

make any person who violates those regulations subject to penalty. 

Based on information provided by the FTC, CBO estimates that 

developing and enforcing the new regulations would have a minor 

cost. Therefore, CBO estimates that implementing the provisions of 

S. 3386 would not significantly increase spending subject to appropriation. 

Enacting S. 3386 could increase revenues from the collection of 

civil penalties; therefore, pay-as-you-go procedures would apply. 

However, CBO estimates that revenue collections from those penalties would be negligible in each year. 

Intergovernmental and private-sector impact: S. 3386 contains no 

intergovernmental mandates as defined in the Unfunded Mandates 

Reform Act (UMRA) and would not affect the budgets of state, 

local, or tribal governments. 

S. 3386 would impose private-sector mandates, as defined in 

UMRA, on sellers that use ‘‘negative-option’’ features in selling 

goods or services on the Internet and on Internet sellers that engage in the sale of consumer financial information for the purpose 

of marketing or sales. 

Internet sellers frequently use a negative-option feature wherein 

consumers who do not wish to buy a good or service being offered 

at the time of another purchase must opt out of the offer. The bill 

would require that new and more detailed information be provided 

to consumers when a negative-option plan is in use, including the 

means by which consumers can avoid charges after any trial period. 

Internet sellers sometimes increase sales and revenues by 

partnering with one another and sharing the financial information 

of consumers without the consumers’ knowledge or consent. As a 

result of those partnerships, consumers may be enrolled in programs and billed, often on a recurring basis, without their knowledge. The majority of those consumers cancel once they discover 

they have been enrolled. The sellers that obtain consumer financial 

information directly would be prohibited from disclosing the financial information of their customers to any third party. Third-party 

Internet sellers would be prohibited from charging or attempting to 

charge consumers for their goods or services unless they have obtained the financial information directly from the consumers and 

received their express informed consent. 

The cost of the mandate would be the forgone revenue from the 

sale of products and services which have been sold in this manner. 

Because of the number of consumers being billed for those types of 

goods and services and the average monthly cost per consumer, 

CBO estimates that the aggregate cost of the mandates would be 

above the annual threshold for private-sector mandates ($141 million in 2010, adjusted annually for inflation). 

Estimate prepared by: Federal costs: Alan Eder and Susan 

Willie; Impact on state, local, and tribal governments: Elizabeth 

Cover Delisle; Impact on the private sector: Marin Randall. 


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Estimate approved by: Peter H. Fontaine, Assistant Director for 

Budget Analysis. 

REGULATORY IMPACT STATEMENT

In accordance with paragraph 11(b) of rule XXVI of the Standing 

Rules of the Senate, the Committee provides the following evaluation of the regulatory impact of the legislation, as reported: 

NUMBER OF PERSONS COVERED

S. 3386 would cover all e-commerce companies whose practices 

meet the definition of a post-transaction third party seller, all 

Internet merchants that would otherwise share consumers’ billing 

information with post-transaction third party sellers, and all marketers of negative option programs offered through the Internet. 

ECONOMIC IMPACT

S. 3386 would not have an adverse impact on the nation’s economy. The legislation is expected to reduce the number of consumers 

who are subject to fraudulent online sales practices, and would 

therefore save consumers millions of dollars every year in unauthorized charges. 

PRIVACY

S. 3386 would increase the personal privacy of consumers making purchases on the Internet by prohibiting online retailers from 

passing consumers’ billing information to post-transaction third 

party sellers. 

PAPERWORK

S. 3386 would not increase paperwork requirements for individuals and businesses. 

CONGRESSIONALLY DIRECTED SPENDING

In compliance with paragraph 4(b) of rule XLIV of the Standing 

Rules of the Senate, the Committee provides that no provisions 

contained in the bill, as reported, meet the definition of congressionally directed spending items under the rule. 

SECTION-BY-SECTION ANALYSIS

Section 1. Short Title. 

This section would provide that the Act may be cited as the Restore Online Shoppers’ Confidence Act. 

Section 2. Findings; Declaration of Policy. 

Section 2 sets out the bill’s findings, which are based in large 

part on the Committee’s year-long investigation into aggressive online sales tactics. 

Section 3. Prohibitions Against Certain Unfair and Deceptive Internet Sales Practices. 

Section 3(a) would prohibit an online post-transaction third party 

seller from charging a consumer unless the post-transaction third 

party seller has clearly disclosed the terms of an Internet purchase 


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to the consumer and has obtained the consumer’s express informed 

consent to the purchase. The consumer signifies express informed 

consent by submitting his or her billing information, including the 

full credit or debit card number, to the post-transaction third party 

seller and by performing an additional affirmative action. 

Section 3(b) would prohibit Internet retailers and other commercial websites (‘‘initial merchants’’) from transferring a consumer’s 

billing information to post-transaction third party sellers. 

Section 3(c) would establish rules under which Internet retailers 

may periodically charge consumers for goods or services until the 

consumer cancels the arrangement (‘‘negative option feature’’). It 

would prohibit a seller from charging a consumer through a negative option feature unless: 1) the seller has clearly disclosed the 

terms of the plan to the consumer; 2) the seller has obtained the 

consumer’s express informed consent to the plan; and 3) the seller 

provides the consumer simple, convenient ways to cancel the negative option plan. 

Section 3(d) would define the terms initial merchant, negative 

option, and post-transaction third party seller. 

Section 4. Enforcement by Federal Trade Commission. 

Section 4 would give the Federal Trade Commission the authority to enforce the prohibitions in section 3 and to write regulations 

furthering enforcement of the prohibitions in section 3. 

Section 5. Enforcement by State Attorneys General. 

Section 5 would give State Attorneys General the authority to 

use injunctive relief in Federal court to stop entities from violating 

the prohibitions in section 3. 

CHANGES IN EXISTING LAW

In compliance with paragraph 12 of rule XXVI of the Standing 

Rules of the Senate, the Committee states that the bill as reported 

would make no change to existing law. 


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