Proposed ‘Click-to-Cancel’ Rule Aimed at Simplifying Subscription Cancellations Faces Blockage

A federal appeals court has blocked a “click-to-cancel” rule that was set to make it easier for consumers to cancel unwanted subscriptions and memberships. Just days before the rule was set to go into effect, the U.S. Court of Appeals for the Eighth Circuit determined that the Federal Trade Commission (FTC) had made a procedural mistake by not conducting a preliminary regulatory analysis. This analysis is necessary for rules that are projected to have an annual economic impact exceeding $100 million.

The rule, adopted by the FTC in October, aimed to require businesses to obtain customer consent before initiating charges for memberships and auto-renewals, particularly those connected to free trial offers. The FTC also emphasized the need for companies to disclose when promotional offers would end, ensuring that customers could cancel recurring subscriptions as easily as they were started. This initiative was part of President Joe Biden’s broader “Time is Money” campaign, intended to address consumer-related frustrations and improve protections.

The court’s decision to vacate the rule stems from a finding by an administrative law judge that the expected economic impact would indeed surpass the $100 million threshold, contradicting the FTC’s initial assessment. The court indicated that while it does not support the unfair practices associated with negative option marketing, the procedural flaws in the rulemaking process were significant enough to invalidate the rule. As the FTC grapples with this setback, it is preparing for a trial concerning Amazon’s Prime program.

This lawsuit alleges that Amazon enrolled consumers in its Prime service without their consent, making cancellation challenging. The trial is anticipated to begin next year, highlighting ongoing issues in consumer protection and fair marketing practices.