Federal appeals court blocks FTC’s ‘click-to-cancel’ rule

A termination concept with cursor clicking on cancel subscription button on digital screen representing end of service agreement
Click-to-cancel FILE PHOTO: An FTC rule that would have made it easier to cancel a subscription has been vacated days before it was to go into effect. (newlifestock - stock.adobe.com)

A rule that would have made it easier to cancel unwanted subscriptions was supposed to go into effect next week, but has now been blocked by a federal appeals court.

The Federal Trade Commission’s “click-to-cancel” rule was adopted in October and would have required companies to disclose when a free trial ended and to make it just as easy to cancel as it is to sign up for a service, The Associated Press reported.

It also required companies to get consent before charging customers for memberships and auto-renewals.

The rule would have applied to companies that sell subscriptions. The Washington Post said that it would include gyms and streaming platforms. If a company violated the rule there would have been a civil penalty.

It was challenged by several groups, including the U.S. Chamber of Commerce and the National Federation of Independent Business, saying that the FTC overstepped its authority and did not follow rules.

But the U.S. Court of Appeals said there was a procedural error made by the FTC that did not provide a preliminary regulatory analysis, required for rules that would impact the economy of more than $100 million.

The FTC did not give the analysis because it estimated that the regulation would not impact the economy at that threshold, but an administrative law judge disagreed and said it would be above the 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.

The decision vacated the rule in full, the Post reported.

The rule was scheduled to go into effect on July 14.

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