Revision of the Negative Option Rule, Withdrawal of the CARS Rule, Removal of the Non-Compete Rule To Conform These Rules to Federal Court Decisions
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Abstract
In light of Federal court decisions, the Federal Trade Commission ("FTC" or "Commission") is taking final action to conform three of its recent rules to the results ordered by the courts. First, the Commission is revising its recently amended "Rule Concerning Recurring Subscriptions and Other Negative Option Programs" ("Negative Option Rule") to recodify the text of the Negative Option Rule as it existed before the effective date of the Commission's 2024 final rule amending it. Second, the Commission is withdrawing its final rule titled "Combating Auto Retail Scams Trade Regulation Rule" ("CARS Rule"). Third, the Commission is removing its "Non-Compete Clause Rule" ("Non-Compete Rule") from the Code of Federal Regulations.
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<title>Federal Register, Volume 91 Issue 29 (Thursday, February 12, 2026)</title>
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[Federal Register Volume 91, Number 29 (Thursday, February 12, 2026)]
[Rules and Regulations]
[Pages 6507-6510]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2026-02866]
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Rules and Regulations
Federal Register
________________________________________________________________________
This section of the FEDERAL REGISTER contains regulatory documents
having general applicability and legal effect, most of which are keyed
to and codified in the Code of Federal Regulations, which is published
under 50 titles pursuant to 44 U.S.C. 1510.
The Code of Federal Regulations is sold by the Superintendent of Documents.
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Federal Register / Vol. 91, No. 29 / Thursday, February 12, 2026 /
Rules and Regulations
[[Page 6507]]
FEDERAL TRADE COMMISSION
16 CFR Parts 425, 463, and 910
RIN 3084-AB60
RIN 3084-AB72
RIN 3084-AB74
Revision of the Negative Option Rule, Withdrawal of the CARS
Rule, Removal of the Non-Compete Rule To Conform These Rules to Federal
Court Decisions
AGENCY: Federal Trade Commission.
ACTION: Final rule.
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SUMMARY: In light of Federal court decisions, the Federal Trade
Commission (``FTC'' or ``Commission'') is taking final action to
conform three of its recent rules to the results ordered by the courts.
First, the Commission is revising its recently amended ``Rule
Concerning Recurring Subscriptions and Other Negative Option Programs''
(``Negative Option Rule'') to recodify the text of the Negative Option
Rule as it existed before the effective date of the Commission's 2024
final rule amending it. Second, the Commission is withdrawing its final
rule titled ``Combating Auto Retail Scams Trade Regulation Rule''
(``CARS Rule''). Third, the Commission is removing its ``Non-Compete
Clause Rule'' (``Non-Compete Rule'') from the Code of Federal
Regulations.
DATES: This rule is effective February 12, 2026. The withdrawal of the
Commission's final rule published at 89 FR 590 (Jan. 4, 2024) and
delayed at 89 FR 13267 (Feb. 22, 2024) is also effective February 12,
2026.
FOR FURTHER INFORMATION CONTACT: Josephine Liu, Office of the General
Counsel, 202-326-2170 Federal Trade Commission, 600 Pennsylvania Avenue
NW, Washington, DC 20580.
SUPPLEMENTARY INFORMATION:
I. Background and Discussion
The Federal Trade Commission (``FTC'' or ``Commission'') is taking
final action in light of Federal court decisions vacating the
Commission's final rules in three of the Commission's recent rulemaking
proceedings. These decisions vacated final rules revising the Negative
Option Rule and promulgating the CARS Rule and the Non-Compete Rule.
Each will be discussed in turn.
A. The Negative Option Rule--16 CFR Part 425
The Commission first promulgated the Negative Option Rule in 1973
pursuant to the FTC Act, 15 U.S.C. 41 et seq., finding that some
negative option marketers were engaged in unfair and deceptive
practices that violated section 5 of the Act, 15 U.S.C. 45.\1\ On
November 15, 2024, the Commission published a final rule (``2024
Rule'') amending its Negative Option Rule.\2\ Among other things, the
2024 Rule (1) prohibited misrepresentations of any material fact made
while marketing using negative option features; (2) required sellers to
provide important information prior to obtaining consumers' billing
information and charging consumers; (3) required sellers to obtain
consumers' unambiguously affirmative consent to the negative option
feature prior to charging them; and (4) required sellers to provide
consumers with simple cancellation mechanisms to immediately halt all
recurring charges.
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\1\ See FTC, Final Rule: Negative Option Rule, 89 FR 90476,
90477-78 (Nov. 15, 2024).
\2\ See id. at 90476.
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After the 2024 Rule was published, businesses and industry groups
asked four Federal circuit courts to review the Negative Option Rule.
The Judicial Panel on Multidistrict Litigation consolidated their
petitions in the U.S. Court of Appeals for the Eighth Circuit.\3\
Petitioners argued that the 2024 Rule did not meet the specificity and
prevalence requirements of section 18 of the FTC Act,\4\ violated
section 22 of the FTC Act \5\ because the Commission had not issued a
preliminary regulatory analysis, and was overbroad and unworkable.\6\
The Eighth Circuit found that the Commission's failure to issue a
preliminary regulatory analysis was ``procedurally insufficient'' and
vacated the 2024 Rule.\7\
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\3\ Custom Commc'ns, Inc. v. FTC, 142 F.4th 1060 (8th Cir.
2025).
\4\ 15 U.S.C. 57a.
\5\ 15 U.S.C. 57b-3(b)(1).
\6\ 142 F.4th at 1069-70.
\7\ Id. at 1074.
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In light of the Eighth Circuit's vacatur, this final rule revises
the Negative Option Rule to restore it in the form it existed before
the 2024 Rule became effective.\8\ See Menorah Med. Ctr. v. Heckler,
768 F.2d 292, 297 (8th Cir. 1985) (``Unless special circumstances are
present, which we do not find here, prior regulations remain valid
until replaced by a valid regulation or invalidated by a court.''); see
also Action on Smoking & Health v. CAB, 713 F.2d 795, 797 (D.C. Cir.
1983) (``[B]y vacating or rescinding the [amendments], the judgment of
this court had the effect of reinstating the rules previously in
force.'').
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\8\ This recodification includes changing the full name of the
rule back to ``Use of Prenotification Negative Option Plans.''
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B. The CARS Rule--16 CFR Part 463
In January 2024, the Commission published its CARS Rule \9\ which,
among other things, prohibited motor vehicle dealers from making
certain misrepresentations in the course of selling, leasing, or
arranging financing for motor vehicles; required accurate pricing
disclosures in dealers' advertising and sales communications; required
dealers to obtain consumers' express, informed consent for charges;
prohibited the sale of any add-on product or service that confers no
benefit to the consumer; and required dealers to keep records of
certain advertisements and customer transactions.\10\
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\9\ See FTC, Final Rule: Combating Auto Retail Scams Trade
Regulation Rule, 89 FR 590 (Jan. 4, 2024). The Dodd-Frank Act (Pub.
L. 111-203, 124 Stat 1376 (2010)) authorizes the Commission to
prescribe rules with respect to unfair or deceptive acts or
practices by motor vehicle dealers. 12 U.S.C. 5519(d).
\10\ 89 FR 590.
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On or about January 5, 2024, the National Automobile Dealers
Association and the Texas Automobile Dealers Association filed a
petition for review in the U.S. Court of Appeals for the Fifth
Circuit.\11\ On January 8, 2024, they filed a motion with the Fifth
Circuit seeking a stay of the CARS Rule and expedited consideration of
their petition. On February 22, 2024, the Commission delayed the
effective date
[[Page 6508]]
of the CARS Rule during the pendency of this legal challenge.\12\
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\11\ Nat'l Auto. Dealers Ass'n v. FTC, 127 F.4th 549 (5th Cir.
2025).
\12\ See FTC, Final Rule: Combating Auto Retail Scams Trade
Regulation Rule, delay of effective date, 89 FR 13267 (Feb. 22,
2024) (stating that although the petitioners did not seek a stay
from the Commission in the first instance as required by Rule
18(a)(1) of the Federal Rules of Appellate Procedure, the Commission
nonetheless reviewed their motion, construing it as though it were a
stay request submitted under Commission Rule 4.2(d) (16 CFR 4.2(d)),
and delayed the effective date of the CARS Rule). This delay
document also stated that the Commission would publish a document in
the Federal Register announcing the CARS Rule's new effective date
once the court resolved the merits of the petition.
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On January 27, 2025, the Fifth Circuit found ``that the substantive
authority for the CARS Rule arises from Sec. 18(a)(1)(B) of the FTC
Act and that subpart B \13\ [of the FTC's] procedures apply in all
rulemakings where Sec. 18(a)(1)(B) provides authority.'' \14\ The
court concluded that the FTC ``violated its own regulations when it
failed to issue an ANPRM for the CARS Rule.'' \15\ The Fifth Circuit
further found that this error was not harmless and vacated the CARS
Rule.\16\
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\13\ 16 CFR 1.7-1.20.
\14\ 127 F.4th at 559.
\15\ Id.
\16\ Id. at 561.
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This final rule withdraws the CARS Rule published at 89 FR 590
(Jan. 4, 2024) and delayed at 89 FR 13267 (Feb. 22, 2024) to conform
the rule with the Fifth Circuit's decision.
C. The Non-Compete Rule--16 CFR Part 910
On May 7, 2024, the Commission published its Non-Compete Rule.\17\
The Non-Compete Rule provided that it is an unfair method of
competition and therefore a violation of section 5 of the FTC Act for
persons to, among other things, enter into non-compete clauses (``non-
competes'') with workers on or after September 4, 2024. With respect to
existing non-competes--i.e., non-competes entered into before September
4, 2024--the Non-Compete Rule adopted a different approach for senior
executives than for other workers. For senior executives, existing non-
competes could remain in force, while existing non-competes with other
workers were not enforceable after September 4, 2024.\18\
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\17\ See FTC, Final Rule: Non-Compete Clause Rule, 89 FR 38342
(May 7, 2024).
\18\ Id.
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After the Non-Compete Rule was issued, several employers and trade
groups filed lawsuits challenging it. Plaintiffs argued, among other
things, that the Commission did not have the statutory authority to
issue the Non-Compete Rule; that the rule violated the major questions
doctrine; and that it was unlawfully retroactive. Federal district
courts in three jurisdictions issued opinions in lawsuits challenging
the Non-Compete Rule. In one case, the court denied the plaintiff's
motion for a preliminary injunction.\19\ In another case, the court
concluded that the plaintiff had demonstrated a likelihood of success
on its claim that the Non-Compete Rule violated the major questions
doctrine and entered a preliminary injunction that was limited to the
plaintiff.\20\ In the third case, the court held that the Non-Compete
Rule was unlawful and set it aside.\21\ Specifically, because the court
``concluded that (i) the FTC promulgated the Non-Compete Rule in excess
of its statutory authority, and (ii) the Rule is arbitrary and
capricious,'' the court found that it ``must `hold unlawful' and `set
aside' the FTC's Rule as required under Sec. 706(2)'' of the
Administrative Procedure Act.\22\
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\19\ ATS Tree Servs., LLC v. FTC, No. CV 24-1743, 2024 WL
3511630, at *19 (E.D. Pa. July 23, 2024).
\20\ Props. of the Villages, Inc. v. FTC, No. 5:24-CV-316-TJC-
PRL, 2024 WL 3870380, at *11 (M.D. Fla. Aug. 15, 2024).
\21\ Ryan, LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024).
\22\ Id. at 389-90.
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On September 5, 2025, the Commission voted 3-1 to dismiss its
appeals in Ryan, LLC v. FTC, No. 24-10951 (5th Cir.), and Properties of
the Villages v. FTC, No. 24-13102 (11th Cir.) and accede to the vacatur
of the Non-Compete Rule.\23\ With the Commission having now acceded to
vacatur, this final rule removes the Non-Compete Rule codified at 16
CFR part 910 from the Code of Federal Regulations (``CFR'').
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\23\ Press Release, FTC, Federal Trade Commission Files to
Accede to Vacatur of Non-Compete Clause Rule (Sept. 5, 2025),
<a href="https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-files-accede-vacatur-non-compete-clause-rule">https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-files-accede-vacatur-non-compete-clause-rule</a>.
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II. Procedural Requirements
A. The Administrative Procedure Act
The APA allows agencies to dispense with notice and public comment
if the agency finds for good cause that notice and comment are
unnecessary.\24\ The Commission has determined that notice and comment
is unnecessary in this instance because Federal courts have vacated
these rules. Here, the Commission--by revising the Negative Option
Rule, withdrawing the CARS Rule, and removing the Non-Compete Rule from
the CFR--is simply undertaking the ministerial task of conforming these
Rules to the results ordered by the circuit courts. Thus, seeking
public comment on these actions is unnecessary.
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\24\ 5 U.S.C. 553(b)(B).
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For the same reasons that this final rule is exempt from notice-
and-comment rulemaking requirements, the Commission finds that good
cause exists to make this final rule effective upon publication in the
Federal Register under 5 U.S.C. 553(d)(3).
B. E.O. 14215, Ensuring Accountability for All Agencies; E.O. 12866,
Regulatory Planning and Review; E.O. 14192, Unleashing Prosperity
Through Deregulation
E.O. 14215 requires all executive branch departments and agencies,
including independent agencies, to submit all their proposed and final
significant regulatory actions to the Office of Budget and Management
(OMB) for review. E.O. 12866 says that agencies should assess the costs
and benefits of available regulatory alternatives and, if regulation is
necessary, select regulatory approaches that maximize net benefits
(including potential economic, environmental, public health and safety
effects, and distributive impacts). OMB determined that this final rule
is not a significant regulatory action under E.O. 12866.
Executive Order 14192 requires that any new incremental costs
associated with certain significant regulatory actions ``shall, to the
extent permitted by law, be offset by the elimination of existing costs
associated with at least 10 prior regulations.'' OMB's guidance to
agencies implementing E.O. 14192 defines two types of E.O. 14192
actions: an E.O. 14192 regulatory action and an E.O. 14192 deregulatory
action.\25\ The guidance defines an E.O. 14192 deregulatory action as
``an action that has been finalized and has total costs less than
zero.'' \26\ The guidance further explains that ``an E.O. 14192
deregulatory action qualifies as both (1) one of the actions used to
satisfy the provision to repeal or revise at least 10 existing
regulations for each regulation issued and (2) a cost savings for
purposes of the total incremental cost allowance.'' \27\ This
rulemaking is expected to have total costs less than zero, and
therefore is expected to be an E.O. 14192 deregulatory action.
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\25\ OMB, M-25-20; Memorandum For: Regulatory Policy Officers at
Executive Departments And Agencies and Managing and Executive
Directors of Certain Agencies and Commissions (Mar. 26, 2025),
<a href="https://www.whitehouse.gov/wp-content/uploads/2025/02/M-25-20-Guidance-Implementing-Section-3-of-Executive-Order-14192-Titled-Unleashing-Prosperity-Through-Deregulation.pdf">https://www.whitehouse.gov/wp-content/uploads/2025/02/M-25-20-Guidance-Implementing-Section-3-of-Executive-Order-14192-Titled-Unleashing-Prosperity-Through-Deregulation.pdf</a>.
\26\ Id. at 4.
\27\ Id.
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[[Page 6509]]
C. Paperwork Reduction Act
Under the Paperwork Reduction Act of 1995 and its implementing
regulations, the FTC is required to submit changes to collections of
information to OMB for review and approval.\28\ The vacatur of the 2024
Rule amending the Negative Option Rule, the CARS Rule, and the Non-
Compete Rule impacted the following OMB-approved collections:
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\28\ 44 U.S.C. 3501-3521; 5 CFR part 1320.
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<bullet> Negative Option Rule collection of information, control
number 3084-0104,\29\
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\29\ On November 11, 2024, OMB approved this revised collection
through November 30, 2027.
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<bullet> CARS Rule collection of information, control number 3084-
0172,\30\ and
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\30\ On June 20, 2024, OMB approved this collection through June
30, 2027.
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<bullet> Non-Compete Rule collection of information, control number
3084-0173.\31\
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\31\ On June 25, 2024, OMB approved this collection through June
30, 2027.
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The Commission will file a request to discontinue these collections
with OMB on the same date that this final rule publishes in the Federal
Register. For the CARS Rule and Non-Compete Rule, the Commission will
request a discontinuance of all collections and their associated OMB
control numbers. For the Negative Option Rule, the Commission will
request a discontinuance only for the revised collections associated
with the 2024 Rule.\32\ This final rule recodifies the text of the
Negative Option Rule as it existed before the 2024 Rule became
effective. Thus, OMB's February 13, 2024 approval of an extension for
information collections associated with the previous and now recodified
version of the Negative Option Rule will be in effect.\33\
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\32\ 89 FR 90476 (Nov. 15, 2024).
\33\ On February 13, 2024, OMB approved an extension of the
information collections associated with the version of the Negative
Option Rule that was legally applicable before the subsequent 2024
Rule became effective.
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D. Regulatory Flexibility Act
Because the Commission has determined that it may revise the
Negative Option Rule, withdraw the CARS Rule, and remove the Non-
Compete Rule from the CFR without public comment, the Commission is
also not required to publish an initial or final regulatory flexibility
analysis under the Regulatory Flexibility Act as part of such
action.\34\
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\34\ See 5 U.S.C. 603(a), 604(b).
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E. Congressional Review Act
Pursuant to the Congressional Review Act (5 U.S.C. 801 et seq.),
the Office of Information and Regulatory Affairs designated this rule
as not a ``major rule,'' as defined by 5 U.S.C. 804(2).
List of Subjects
16 CFR Part 425
Advertising, consumer protection, trade practices.
16 CFR Part 463
Consumer protection, motor vehicles, reporting and recordkeeping
requirements, trade practices.
16 CFR Part 910
Antitrust.
For the reasons set forth above, under the authority of 15 U.S.C.
41 et seq., the Commission amends 16 CFR chapter I as follows:
0
1. Revise part 425 to read as follows:
PART 425--USE OF PRENOTIFICATION NEGATIVE OPTION PLANS
Sec.
425.1 The rule.
425.2 [Reserved]
Authority: 15 U.S.C. 41 through 58
PART 425--USE OF PRENOTIFICATION NEGATIVE OPTION PLANS
Sec. 425.1 The rule.
(a) In connection with the sale, offering for sale, or distribution
of goods and merchandise in or affecting commerce, as ``commerce'' is
defined in the Federal Trade Commission Act, it is an unfair or
deceptive act or practice, for a seller in connection with the use of
any negative option plan to fail to comply with the following
requirements:
(1) Promotional material shall clearly and conspicuously disclose
the material terms of the plan, including:
(i) That aspect of the plan under which the subscriber must notify
the seller, in the manner provided for by the seller, if he does not
wish to purchase the selection;
(ii) Any obligation assumed by the subscriber to purchase a minimum
quantity of merchandise;
(iii) The right of a contract-complete subscriber to cancel his
membership at any time;
(iv) Whether billing charges will include an amount for postage and
handling;
(v) A disclosure indicating that the subscriber will be provided
with at least ten (10) days in which to mail any form, contained in or
accompanying an announcement identifying the selection, to the seller;
(vi) A disclosure that the seller will credit the return of any
selections sent to a subscriber, and guarantee to the Postal Service or
the subscriber postage to return such selections to the seller when the
announcement and form are not received by the subscriber in time to
afford him at least ten (10) days in which to mail his form to the
seller;
(vii) The frequency with which the announcements and forms will be
sent to the subscriber and the maximum number of announcements and
forms which will be sent to him during a 12-month period.
(2) Prior to sending any selection, the seller shall mail to its
subscribers, within the time specified by paragraph (a)(3) of this
section:
(i) An announcement identifying the selection;
(ii) A form, contained in or accompanying the announcement, clearly
and conspicuously disclosing that the subscriber will receive the
selection identified in the announcement unless he instructs the seller
that he does not want the selection, designating a procedure by which
the form may be used for the purpose of enabling the subscriber so to
instruct the seller, and specifying either the return date or the
mailing date.
(3) The seller shall mail the announcement and form either at least
twenty (20) days prior to the return date or at least fifteen (15) days
prior to the mailing date, or provide a mailing date at least ten (10)
days after receipt by the subscriber, provided, however, that whichever
system the seller chooses for mailing the announcement and form, such
system must provide the subscriber with at least ten (10) days in which
to mail his form.
(b) In connection with the sale or distribution of goods and
merchandise in or affecting commerce, as ``commerce'' is defined in the
Federal Trade Commission Act, it shall constitute an unfair or
deceptive act or practice for a seller in connection with the use of
any negative option plan to:
(1) Refuse to credit, for the full invoiced amount thereof, the
return of any selection sent to a subscriber, and to guarantee to the
Postal Service or the subscriber postage adequate to return such
selection to the seller, when:
(i) The selection is sent to a subscriber whose form indicating
that he does not want to receive the selection was received by the
seller by the return date or was mailed by the subscriber by the
mailing date;
(ii) Such form is received by the seller after the return date, but
has been mailed by the subscriber and
[[Page 6510]]
postmarked at least 3 days prior to the return date;
(iii) Prior to the date of shipment of such selection, the seller
has received from a contract-complete subscriber, a written notice of
cancellation of membership adequately identifying the subscriber;
however, this provision is applicable only to the first selection sent
to a canceling contract-complete subscriber after the seller has
received written notice of cancellation. After the first selection
shipment, all selection shipments thereafter are deemed to be unordered
merchandise pursuant to section 3009 of the Postal Reorganization Act
of 1970, as adopted by the Federal Trade Commission in its public
notice, dated September 11, 1970;
(iv) The announcement and form are not received by the subscriber
in time to afford him at least ten (10) days in which to mail his form.
(2) Fail to notify a subscriber known by the seller to be within
any of the circumstances set forth in paragraphs (b)(1)(i) through (iv)
of this section, that if the subscriber elects, the subscriber may
return the selection with return postage guaranteed and receive a
credit to his account.
(3) Refuse to ship within 4 weeks after receipt of an order
merchandise due subscribers as introductory and bonus merchandise,
unless the seller is unable to deliver the merchandise originally
offered due to unanticipated circumstances beyond the seller's control
and promptly makes a reasonably equivalent alternative offer. However,
where the subscriber refuses to accept alternatively offered
introductory merchandise, but instead insists upon termination of his
membership due to the seller's failure to provide the subscriber with
his originally requested introductory merchandise, or any portion
thereof, the seller must comply with the subscriber's request for
cancellation of membership, provided the subscriber returns to the
seller any introductory merchandise which already may have been sent
him.
(4) Fail to terminate promptly the membership of a properly
identified contract-complete subscriber upon his written request.
(5) Ship, without the express consent of the subscriber,
substituted merchandise for that ordered by the subscriber.
(c) For the purposes of this part:
(1) Negative option plan refers to a contractual plan or
arrangement under which a seller periodically sends to subscribers an
announcement which identifies merchandise (other than annual
supplements to previously acquired merchandise) it proposes to send to
subscribers to such plan, and the subscribers thereafter receive and
are billed for the merchandise identified in each such announcement,
unless by a date or within a time specified by the seller with respect
to each such announcement the subscribers, in conformity with the
provisions of such plan, instruct the seller not to send the identified
merchandise.
(2) Subscriber means any person who has agreed to receive the
benefits of, and assume the obligations entailed in, membership in any
negative option plan and whose membership in such negative option plan
has been approved and accepted by the seller.
(3) Contract-complete subscriber refers to a subscriber who has
purchased the minimum quantity of merchandise required by the terms of
membership in a negative option plan.
(4) Promotional material refers to an advertisement containing or
accompanying any device or material which a prospective subscriber
sends to the seller to request acceptance or enrollment in a negative
option plan.
(5) Selection refers to the merchandise identified by a seller
under any negative option plan as the merchandise which the subscriber
will receive and be billed for, unless by the date, or within the
period specified by the seller, the subscriber instructs the seller not
to send such merchandise.
(6) Announcement refers to any material sent by a seller using a
negative option plan in which the selection is identified and offered
to subscribers.
(7) Form refers to any form which the subscriber returns to the
seller to instruct the seller not to send the selection.
(8) Return date refers to a date specified by a seller using a
negative option plan as the date by which a form must be received by
the seller to prevent shipment of the selection.
(9) Mailing date refers to the time specified by a seller using a
negative option plan as the time by or within which a form must be
mailed by a subscriber to prevent shipment of the selection.
Sec. 425.2 [Reserved]
PART 910 [Removed and Reserved]
0
2. Remove and reserve part 910.
By direction of the Commission.
Joel Christie,
Acting Secretary.
[FR Doc. 2026-02866 Filed 2-11-26; 8:45 am]
BILLING CODE 6750-01-P
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