A federal appeals court blocked a “click to cancel” rule intended to make it easier for consumers to cancel unwanted subscriptions and memberships days before it was set to go into effect. This rule, proposed by the Federal Trade Commission and adopted in October 2024, requires businesses to obtain a customer’s consent before charging for memberships, auto-renewals and programs linked to free trial offers.
The Biden administration included this proposal last year as part of its “time is money” initiative which aimed to reduce hassles threatening consumers. This rule mandated that businesses should obtain a customer’s consent before charging for memberships, auto-renewals and programs linked to free trial offers. The FTC also said at the time that businesses must also disclose when free trials or other promotional offers will end, and that customers should be able to cancel subscriptions just as easily as they started them.
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This rule would have covered all forms of negative option marketing — programs that allow sellers to interpret customer inaction as acceptance of subscriptions, often leading to unintended charges. The FTC’s original 1973 rule only covered limited forms of these practices. It would also have stopped businesses from forcing customers through lengthy chat sessions with agents or creating other barriers to cancellation.
While the FTC rule was set to go into effect on Monday, the U.S. Court of Appeals for the Eighth Circuit said this week that the FTC made a procedural error by failing to come up with a preliminary regulatory analysis, which is required for rules whose annual impact on the U.S. economy is more than $100 million. The FTC claimed that it did not have to come up with a preliminary regulatory analysis because it initially determined that the rule’s impact on the national economy would be less than $100 million. An administrative law judge decided that the economic impact would be more than the $100 million threshold.
“While we certainly do not endorse the use of unfair and deceptive practices in negative option marketing, the procedural deficiencies of the Commission’s rulemaking process are fatal here,” the court wrote, as it decided to vacate the rule. The court added that while parts of the rule were “technically salvageable,” vacating the rule was appropriate “because of the prejudice suffered by Petitioners as a result of the Commission’s procedural error.”
The Commission has received an increasing number of complaints about subscription practices. There have been 70 consumer complaints per day in 2024, up from 42 in 2021. This applies to almost every negative option program across any media platform.