Mastercard, With Its Negative Option Policy, Does Not Intend to Cover Newspapers

After Mastercard recently announced a new draft policy aimed at reigning in misleading “negative option” campaigns, the Alliance informed Mastercard of the potential for the policy to hurt newspapers’ efforts to grow subscription revenue. The Alliance successfully convinced the credit card company to revise its policy so as not to bring newspapers into the scope of the new rules.

In late March, Mastercard announced its draft policy to address unacceptable merchant behavior around negative option marketing involving physical products, such as cosmetics, health-care products or vitamins. The policy covers “free trials” and requires merchants to notify a consumer at the end of a trial period before charging him or her (despite the merchant already receiving the consumer’s explicit consent to start the free trial). In addition, the policy mandates the merchant send an electronic receipt to the cardholder, each time the merchant authorizes an automatic renewal transaction, that includes instructions for canceling the product or service before the next payment is sent.

Under the new policy, payment processors must register “high risk merchants” through the Mastercard Registration Program (MRP) and verify that those merchants are in compliance with Mastercard Standards and applicable laws.

The Alliance expressed concerns to Mastercard over the draft policy, specifically that newspapers were being unintentionally incorporated into the scope of the new rules. The Alliance informed Mastercard that the notice for the opportunity to cancel with each payment would lead to increased subscriber churn at a critical time for the industry, as newspapers are pursuing alternate revenue streams due to the increased competition for ad revenue arising from the tech platforms.

In addition, newspapers and other merchants are already complying with a growing number of state laws that require them to take similar steps to notify consumers regarding free trials and auto-renewing subscriptions. Mastercard’s new policy would have added an unnecessary and burdensome layer of compliance for newspapers.

Mastercard representatives acknowledged to the Alliance that newspapers are not the intended target of the new policy and made revisions to clarify that the scope of the policy only applies to physical products and “does not include a subscription to a product where a consumer may receive one or more products for free or at an introductory rate.” In addition, Mastercard provided examples of marketing offers that are “not in the scope of the new Rules.” The company pointed to two newspaper subscription offers: one that promoted a low introductory rate that converted to a monthly subscription, and another that included a free month and then a low rate before the consumer would be charged a full monthly subscription fee. In pointing to these examples, it was important to Mastercard that the newspapers clearly identified the monthly fee that would automatically renew once the free trial and introductory rate was converted.

The Alliance commends Mastercard for its responsiveness to publishers’ concerns. Mastercard will not put out a public guidance document on the new policy for newspapers to use in the event a payment processor inadvertently includes a newspaper on a list of “high risk merchants.” The revised policy has only been distributed to payment processors.

If newspapers run into any problems with payment processors who do not understand that newspapers are not covered in the scope of the rules, they should refer the payment processor to Paul Paolucci, Vice President, Brand Performance Franchise Customer Engagement and Performance (Paul.Paolucci@mastercard.com), or they can contact Alliance Senior Vice President, Public Policy, Paul Boyle at paul@newsmediaalliance.org.

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