MANHATTAN (LN) — The settlement, filed in U.S. District Court for the Southern District of New York on May 14, resolves the agency’s complaint that Shutterstock violated Section 5 of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA).
Under the stipulated order, Shutterstock neither admits nor denies the allegations but waived its right to appeal or contest the validity of the order. The company agreed to pay the $35 million, which its counsel confirmed is held in escrow specifically for the purpose of satisfying the judgment.
The order imposes strict obligations on how Shutterstock markets and sells subscriptions and on-demand packs. The company is permanently enjoined from misrepresenting material facts, including the existence of a negative-option feature, the terms of the subscription, or the cost of the service.
A "negative-option feature" is defined in the order as a provision where a customer’s silence or failure to take affirmative action to reject goods is interpreted as acceptance of the offer.
Shutterstock must now clearly and conspicuously disclose all material terms to consumers before obtaining their billing information. These disclosures must include the frequency of charges, the amount consumers will be charged, and the deadlines by which they must act to prevent or stop those charges.
The order requires that these disclosures be placed immediately adjacent to the means of recording consumer consent. The disclosures must be unavoidable in interactive electronic mediums and understandable to reasonable consumers.
The FTC also mandated that Shutterstock obtain express, affirmative consent from consumers before charging them. The company is prohibited from failing to provide simple mechanisms for consumers to cancel their subscriptions or stop recurring charges.
The cancellation mechanism must be at least as easy to use as the one used to consent to the subscription. For internet cancellations, the mechanism must be easy to find. For telephone cancellations, the company must provide a number that is easy to find, available during normal business hours, and no more costly to use than the number used to consent.
Shutterstock must also provide sufficient customer information to enable the FTC to administer consumer redress. The company represented that it has already provided this information to the commission.
The order includes extensive compliance reporting requirements. Shutterstock must submit a sworn compliance report one year after the order’s entry, detailing its businesses, advertising practices, and compliance with each section of the order.
For 10 years, the company must submit a sworn compliance notice within 14 days of any change in its designated point of contact or corporate structure. It must also report any bankruptcy or insolvency proceedings within 14 days of filing.
Shutterstock is required to retain various records for 10 years, including accounting records, personnel records, and consumer complaints. The company must also keep a representative sample of advertisements and marketing materials, as well as records of scripts and training materials used by employees and artificial intelligence systems communicating with consumers.
The FTC is authorized to monitor compliance through depositions, document production, and direct communication with Shutterstock employees. The commission may also pose as consumers or suppliers to test compliance without prior notice.
The facts alleged in the complaint will be taken as true in any subsequent civil litigation by the U.S. Federal Trade Commission, including proceedings to enforce the judgment or in bankruptcy nondischargeability complaints.
The order was signed by U.S. District Judge Arun Subramanian.