Clients Update- Marking a Default Option
25 April 2022
Dear clients and colleagues,
We would like to inform you that the Consumer Protection and Fair Trade Authority (the “Authority“) has issued a directive (the “Directive“) regarding a default marking in the purchase of a product or service (the Directive is dated April 11, 2022).
In accordance with the Directive, the Authority is of the view that the use of Default Effect by dealers, as part of an offer or engagement in a transaction with consumers, constitutes an improper practice that violates section 3 of the Consumer Protection Law, 5741—1981 (the “Law“), which prohibits the exerting of unfair influence on consumers.
How does the Default Effect manifest? According to the Authority, in many cases, dealers tend to design a sale environment and guide the behavior of consumers, by shaping a transaction in which the dealer pre-marks the option that includes purchasing the product, and if the consumer wishes to decline the receipt of the product, he/she must mark the other option, according to which he/she is not interested in the product (opt-out model). This is in contrast to a transaction in which the dealer does not pre-mark the option that includes a purchase, and if a consumer wishes to purchase a product, he/she must actively indicate his/her interest in the product (opt-in model).
The Authority’s position is that a practice based on the opt-out model, i.e. when the default option is that the consumer is interested in purchasing the product (while required to actively change such choice if he/she is not interested), encourages purchases, even by way of distraction. In addition, such model significantly harms the consumer’s freedom of contract and may be considered an unfair influence on the consumer (In particular, contrary to section 3(b)(8) of the Law that prohibits supplying a product or service for a fee, without the express request of the consumer).
The sanction for violating the prohibition on exerting an unfair influence on consumers is severe and amounts to up to three years imprisonment or a fine of up to NIS 4,520,000, when the offense was committed in aggravated circumstances (for example, if the offense was committed in respect to a large number of consumers). In addition, the Authority is entitled to impose on a corporation that commits the offense an administrative fine in the amount of approximately NIS 46,000 (or 1.5 times such amount when the offense was committed in respect to a particularly large number of consumers). Furthermore, the offender may be exposed to civil claims by consumers (including class actions).
The Directive applies to a dealer-consumer relationship only.
To read the Directive in full (in Hebrew), please use the following link.
Please do not hesitate to contact us if you have any questions or require any clarification regarding the above
Herzog Fox & Neeman