Court Cancels ‘Click-to-Cancel’ Rule

Many of us have had the experience of signing up for a subscription we no longer want or never wanted in the first place (see free trial offers) and then finding it difficult – or impossible – to cancel.

That’s what made the FTC’s “click to cancel” rule provision, proposed as an update to the agency’s 1973 Negative Option Rule, so popular with consumers. Under the revised rule, designed to stop the bleeding of billions of dollars in unwanted recurring charges, sellers would be required to make it as easy to cancel subscriptions as it was to sign up. So if you signed up online, you should also be able to cancel online – with a simple click.

The deadline for compliance with the new rule provision was supposed to be today. But days before companies would be required to comply, a federal appeals court last week vacated the amended Negative Option Rule, effectively canceling “click-to-cancel.”

In the end, it was a procedural error that killed the “click-to-cancel” rule.

In siding with industry groups that had filed petitions opposing the rule, the court found that the FTC failed to conduct a “preliminary regulatory analysis” required for rules whose annual impact on the U.S. economy exceeds $100 million.

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.

For its part, the FTC had prepared a cost-benefit analysis, which estimated costs ranging between $100.9 million and $826.2 million and benefits between $6.1 billion and $49.3 billion over 10 years.

Despite its popularity among consumers (not to mention TINA.org, which filed an amicus curiae or “friend of the court” brief in support of the rule following the industry challenge), the “click-to-cancel” rule had its critics. The FTC itself was divided, with two of five commissioners opposing the rule. Some members of Congress also sought to quash it.

What happens next?

This news may embolden marketers that not only make it difficult to cancel subscriptions but also mislead consumers about any important aspects of their offers, including the terms of the subscriptions, the purpose or efficacy of the product or service they’re selling, or anything else likely to matter to consumers (all of which the updated Negative Option Rule was also meant to address).

But some Congress members are stepping up.

Two days after the federal appeals court issued its opinion blocking the rule, Sen. Ruben Gallego (D-Arizona) introduced a bill to codify the FTC’s Negative Option Rule and by extension, the “click-to-cancel” provision.

That same day, Sens. Brian Schatz (D-Hawaii) and John Kennedy (R-Louisiana) revived the Unsubscribe Act, which TINA.org previously endorsed and which among other things would require sellers to provide a simple means for canceling subscriptions.

Find more of our coverage on subscriptions.