Subscription Rule under FTC's "Click-to-Cancel" Plan Fails to Take Impact
The Federal Trade Commission (FTC) has faced a setback in its efforts to regulate the subscription economy with the recent blocking of the "click-to-cancel" rule by a federal appeals court. The ruling, which came just days before the rule was set to take effect, has left the subscription economy unchanged for now.
The "click-to-cancel" rule, also known as the Negative Option Rule, was designed to curb deceptive recurring billing tactics such as friction-laden opt-out processes, obscure cancellation policies, and automatically renewing subscriptions without explicit consumer consent. The rule also mandated that businesses disclose when free trials or promotional offers end and ensure that canceling a recurring subscription is as simple as signing up for one.
However, the U.S. Court of Appeals for the Eighth Circuit ruled that the FTC made a procedural error in establishing the rule, as a preliminary regulatory analysis was not completed. This decision has halted the implementation of the rule and left businesses and consumers without the stricter “click-to-cancel” requirements.
Industry groups including the cable industry, home security companies, and advertisers joined forces to challenge the rule in court. They argued that the FTC was trying to "regulate consumer contracts for all companies in all industries and across all sectors of the economy." As of the most recent available reporting, there is no official public announcement that the FTC has filed an appeal of the Eighth Circuit court’s decision.
The FTC has not commented on the court’s decision, but legal commentary suggests that the agency may appeal the ruling or propose revised regulations in response. However, such action remains speculative at this time; no documents or statements confirming an appeal have been published, and the FTC has not publicly signaled its next steps in the wake of the Eighth Circuit’s order.
For businesses and consumers, the immediate impact is clear: the stricter “click-to-cancel” requirements are not in effect, and compliance is not currently mandated. Stakeholders are advised to monitor for any FTC announcements regarding a potential appeal or new rulemaking efforts.
The value of the subscription economy is estimated to be over half a trillion dollars this year, making the impact of any changes to the subscription economy model significant. Under the Biden administration, the FTC has undertaken a series of enforcement actions under the Restore Online Shoppers' Confidence Act, but the blocking of the "click-to-cancel" rule indicates that the agency's efforts to regulate the subscription economy may face challenges.
[1] FTC's "Click-to-Cancel" Rule Blocked by Court
[2] Court Blocks FTC's "Click-to-Cancel" Rule
[3] FTC's "Click-to-Cancel" Rule Halts Implementation
- The blocking of the FTC's "click-to-cancel" rule by a federal appeals court has left the subscription economy unregulated in terms of stricter consumer rights for now, potentially affecting millions of businesses and consumers in the field of policy-and-legislation and general-news.
- The recent court decision to block the FTC's "click-to-cancel" rule has raised questions about the agency's ability to regulate the business sector, particularly the subscription economy, in a time of increased focus on politics and consumer protection.
