The "Click to Cancel" Rule

→ What’s Happening

FTC’s “Click To Cancel” Rule Finalized

• In mid-October, the Federal Trade Commission finalized its rule that requires sellers to make it easier for consumers to cancel their subscriptions?
• The rule also makes it illegal for sellers to fail to disclose any terms prior to obtaining billing information or failing to obtain consumer consent for any negative option feature before charging them
• In 2024 the FTC received on average 70 complaints a day from consumers about negative option and recurring subscription practices
• The rule will go into full effect 180 days after it is published in the Federal Register

→ Our Thoughts

The average American has around 4 paid subscriptions, although for many, that number is much higher. When you account for streaming services, health subscriptions, and membership programs, we can see how a typical person has a lot of subscriptions to manage on a monthly basis. And while subscriptions can be efficient, convenient, and save consumers money, we know from experience (as many of you do) that they also can be incredibly difficult to get out of when you decide you want to.?

While consumers are rejoicing over this click-to-cancel rule which will make it much faster and easier to cancel existing subscriptions, unsurprisingly most companies are not. In fact, The Internet & Television Association (NCTA) and other trade groups filed a lawsuit against the FTC less than a week after the final rule was announced, claiming that it is “arbitrary, capricious, and an abuse of discretion.” The lawsuit additionally argues that the rule interferes with existing industry standards and could ultimately decrease customer satisfaction.

The FTC has been in existence for over a century, with the mission of “protecting the public from deceptive or unfair business practices and from unfair methods of competition through law enforcement, advocacy, research, and education.” Like other government agencies, it creates specific regulation in response to laws that have been passed by Congress.

As is often true in situations like these, we recognize the foundational question as, how much should the government interfere in a free market? On the one hand, companies want to be able to run their businesses without too many restrictions, and on the other hand, consumers want to be protected from becoming victims of those companies and their practices. Both of those things are necessary to keep the free market free. But in this case, whose stance should prevail??

The lawsuit against the click-to-cancel rule was filed in the 5th U.S. Circuit Court of Appeals, which has recently been involved in several high-profile cases that were decided conservatively. Historically speaking, conservative people believe in a smaller government and less government interference. So whether or not the lawsuit gains traction or not will be interesting to see.?

Depending on how things go, the lawsuit could delay the rule to some extent. But instead of waiting around to see what happens, the best thing for companies to do is to begin to prepare to comply, as the rule most likely will go into full effect around April 2025.