A Federal Appeals Court Blocks FTC’s Click-to-Cancel” Subscription Rule
A federal appeals court has halted a click-to-cancel” subscription rule that was intended to ease consumer cancellation processes for unwanted subscriptions and memberships. This regulation, scheduled to take effect shortly, was crafted by the Federal Trade Commission (FTC) during the latter months of the Biden administration. The rule would have required businesses to gain explicit consent before charging customers for memberships or auto-renewals.
Under this proposed framework, companies were also expected to disclose when free trials or promotional offers expire and ensure that terminating a subscription is as straightforward as signing up for one. However, the U.S. Court of Appeals for the Eighth Circuit deemed that the FTC did not complete a preliminary regulatory analysis because the rule’s annual economic impact was likely to exceed $100 million, necessitating such an assessment.
The estimated value of the global subscription economy in 2024 is over half a trillion dollars, suggesting any significant changes would indeed have substantial economic ramifications. Industry groups opposed this regulation from the outset, challenging it through legal means. The cable industry, home security companies, and advertisers banded together to contest the rule, arguing that it aimed at regulating consumer contracts across all industries and sectors.” Given these strong objections and recent judicial decision, the FTC may opt not to pursue the matter further.
The Intent Behind the Rule
This rule was based on the FTC’s Negative Option Rule, which targeted deceptive recurring billing practices. The rule sought to prevent tactics like complex opt-out procedures, confusing cancellation policies, and auto-renewal of subscriptions without explicit consumer consent.
During the Biden administration, the FTC enforced the Restore Online Shoppers’ Confidence Act, using it to target organizations accused of misusing subscribers’ rights. For instance, in 2023, the FTC initiated a case against Amazon for allegedly enrolling millions of users into its Prime service without their consent and making cancellation difficult.
The FTC is currently preparing for a trial related to this complaint, which is scheduled for next year. This underscores the agency’s ongoing commitment to protecting consumer interests in the subscription economy.