BILL NUMBER: S1549

SPONSOR: COMRIE
 
TITLE OF BILL:

An act to amend the general business law, in relation to prohibiting any
party from charging consumers for unordered or unrequested goods or
services; and to repeal paragraph a of subdivision 2 of section 396 of
such law relating thereto

 
PURPOSE:

To prohibit any party from charging consumers for unordered or unre-
quested goods or services and prohibit "negative option" agreement.

 
SUMMARY OF PROVISIONS:

Section one of the bill would repeal the existing paragraph (a) of
Subdivision two of section 396 of the General Business Law, and substi-
tute a new paragraph (a) with the provisions outlined below.  Subpara-
graph 1 would prohibit any persons, firm, partnership, association or
corporation or agent or employee thereof from offering for sale tangible
              

or intangible goods or services which have not been actually ordered or
requested by the recipient.

Any receipt of unordered goods shall be deemed a gift to the recipient.
Subparagraph 2. prohibits the requesting of payment for unordered goods
and services. Subparagraph 3 prohibits the proposing of any contract or
contract terms for unordered or unrequested goods which purportedly
become effective upon the recipient's failure to respond with a speci-
fied time. Any such proposal is deemed to be void as against public
policy. Subparagraph 4 requires that any unordered or unrequested tangi-
ble goods (defined as any good sent to the recipient in a container)
must be prominently marked on the container in bold letters "THIS IS A
GIFT PAYMENT NOT REQUIRED FOR THIS ITEM".

Subparagraph 5 requires senders at least thirty days prior to the send-
ing or furnishing of any unordered or unrequested intangible goods or
services to mail or deliver a written notice separate from any other
document mailed to the recipient, containing a short, clear and coherent
statement in at least 10-point bold type, that a good or service is to
be sent or furnished to the recipient, the name and a short description
of the good or service, the appropriate date or dates such good or
service is to be sent or furnished, that the good or service is a gift,
and that payment is not required. Subparagraph 6 would exclude from
coverage such membership or club arrangement in which the recipient
receives goods at specified intervals or plans where the recipient
agrees to receive goods without further obligation.

Subparagraph 7 excludes from the bill's provision unordered services or
unrequested services in connection with the renewal or extension of such
contract, providing the renewal or extension of such contract, providing
the renewal was otherwise permitted by law or the terms of such contract
and that no fee or charge has been imposed for the unordered or unre-
quested service which is in addition to the service or services which
were the subject of such contract.

Subparagraph 8 permits any recipient who has been injured by any
violation of the act to bring an action to enjoin the unlawful act or
practice or for damages. A minimum damage amount of $50.00 IS provided
for violations of the act. Prevailing plaintiffs may be awarded reason-
able attorney's fees. Further, the subparagraph makes clear that the
receipt of bill statements or requests for payment for Unordered or
unrequested goods or services itself constitutes injury under the act,
even if the recipient has no 'provable economic damages.

Subparagraph 9 clarifies that this statute does not limit any rights or
remedies otherwise available to recipients under other provisions of
law, including but not limited to the Uniform Commercial Code, or Arti-
cle 22-A of the General Business Law, New York's deceptive practices
statute.

Subparagraph 10 prohibits any waiver by the recipient; by agreement or
otherwise, of any of his or her rights.

 
EXISTING LAW:

The present statute (paragraph a of subdivision 2 of section 396 of the
General Business Law) prohibits businesses from offering for sale
"goods, wares or merchandise" not ordered by the recipient, and declares
that any such goods sent to a consumer shall be considered a "gift".

 
JUSTIFICATION:

This statute is directed against two related unscrupulous business prac-
tices: billing for goods and services which the consumer did not order
or request, and "negative option plan" - offers by businesses which
purport to be accepted if not rejected by the consumer within a stated
period of time. In 1966, the Legislature enacted Chapter 66 of the Laws
of 1966, in response to a long-standing practice of shipping unordered
goods to consumers and then demanding payments either unconditionally or
unless the goods were returned at the consumer's expense. (See. Givens,
Practice Commentaries. McKinney's Cons. Laws of N.Y. Book 19. Gen. Bus.
Law 196 (Supp. At 99). In his memorandum in support of this legislation
Attorney General Lefkowitz stated that his office had "received a virtu-
al avalanche of complaints that reordered merchandise had been forwarded
by mail or hand delivered to resident...." Many persons receiving such
merchandise and particularly parents of children, to whom unordered
merchandise has been delivered, had been pressured into paying for this
merchandise.

Although the practice appears to have abated somewhat since the enact-
ment of Chapter 66. The Consumer Protection Board (CPB) continues to
receive complain is of unordered book and merchandise.

Further, some complaints have concerned unrequested services. For exam-
ple, the CPB has received complaints concerning a firm which has billed
customers for telephone directory advertisements the customers never
requested. As New York's unordered goods statute, contained at Subdivi-
sion 2 of Section 396 of the General Business Law, applies to "goods,
wares or merchandise", it is unclear whether unsolicited services are
covered by the statute. Further, the present statute's prOvision requir-
ing a disclosure on the container that the merchandise is a gift appears
inapplicable to intangible goods and services. This proposal seeks to
address these statutory ambiguities by making Section 396(2) applicable
to unordered intangible goods (ie. computer software) and to services.
Further, business continue to use deceptive and unreasonable "negative
option plans"offers which purport to be accepted if not responded by the
customer within a stated period of time.

In 1991, Telecommunications Inc. (TCI), the nation's largest cable oper-
ator, announced a controversial new plan in which subscribers were
offered at no charge the .Encore movie channel for a short period.
However at the end of the free promotional period, TCI billed every
customer who had not affirmatively indicated within the specified period
that he or she did not wish the service. Present remedied against such
"negative option plans" are at best inadequate under present law. Use of
such a plan may be a deceptive practice under Section 349 of the General
Business Law, but the CPB is unaware of a legal decision which has
specifically so held. (See. Givens.  Practice Commentaries McKinney's
Cons. Laws of N.Y., Book 19 Gen.  Bus. Law 396 Supp. At 99.) Moreover,
although contract law generally regards legal offers not binding if not
affirmatively responded to, limited cases exist where a party's failure
to act will lead to a binding contract. A common example of this, is the
situation where the recipient of the offer uses or obtains the benefit
of goods or services for a period of time without rejecting them.

This harsh legal rule is a trap for the unwary consumer. For example,
where the company's service offering rapid change, such as in the area
of cable television, the consumer may be unaware that the new service he
or she has been offered (i.e. new television channel) requires addi-
tional payment. Finally, consumers have no private right of action under
the Federal Trade Commission's "negative option rule, which is limited
in scope to plans in which a seller periodically offers to send
subscribers new merchandise." (16 CFR Part 425). As this proposal would
prevent consumers from unfairly having to make payment for requested
services as well as goods, and establishes a clear legal rule in this
ear, the bill deserves enactment.

 
LEGISLATIVE HISTORY:

2022: S3785

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.