Subscription Traps To Persist as Court Nixes FTC’s ‘Click-To-Cancel’ Rule Days Before It Was Set To Take Effect
The Eighth Circuit Court says the FTC skipped key steps in rulemaking, leaving consumers stuck with negative option marketing.
A U.S. Federal Appeals Court has clicked the cancel button on a new federal rule that would have made canceling subscriptions as easy as signing up for them in the first place.
The Eighth Circuit Court of Appeals vacated the Federal Trade Commission’s “click-to-cancel” rule, which would have required companies to permit consumers to terminate subscriptions through the same method used for enrollment. The court claims that it found the commission behind the new ruling failed to follow FTC Act procedures in the rule’s development.
“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, adding that “vacatur of the entire Rule is appropriate in this case because of the prejudice suffered by Petitioners as a result of the Commission’s procedural error.”
The ruling, which was scheduled to take effect on July 14, would have covered all forms of negative option marketing — a sales tactic in which a consumer’s inaction is considered acceptance of recurring charges or subscriptions. An original ruling from the FTC in 1973 covered only limited forms of this deceptive practice. “Click-to-cancel” would have also barred businesses from forcing customers to go through barriers like lengthy chat sessions or phone calls to cancel service.
The commission has experienced an increasing volume of complaints regarding subscription practices, with nearly 70 consumer complaints submitted daily in 2024, compared to 42 per day in 2021.
Before the court’s ruling, New York’s attorney general, Letitia James, released a press release on Tuesday that urged customers to “take advantage” of the new rule.
“New Yorkers should never have to jump through hoops just to cancel an unwanted subscription,” she said in a statement. “This new ‘Click-to-Cancel’ rule will protect consumers and ensure companies are operating fairly. I encourage anyone who has a difficult time canceling a subscription to report it to my office, and I will continue to make sure companies throughout our state are following the law.”
Officials from the attorney general’s office told the Guardian that they are reviewing the decision.
