A federal appeals court has blocked a “click-to-cancel” rule just days before it was supposed to take effect. The rule, proposed by the Federal Trade Commission in October, would have required businesses to make it easy for consumers to cancel unwanted subscriptions and memberships. The rule also mandated that businesses must obtain customer consent before charging for memberships, auto-renewals, and programs tied to free trial offers. Businesses were to disclose when free trials or promotional offers would end and allow customers to cancel recurring subscriptions as easily as they signed up for them. The rule was part of President Joe Biden’s “Time is Money” initiative, aimed at reducing consumer-related hassles.
However, the U.S. Court of Appeals for the Eighth Circuit ruled that the FTC made a procedural error by not conducting a preliminary regulatory analysis for rules with an annual impact on the U.S. economy exceeding $100 million. The FTC believed the rule’s impact would be under $100 million, but an administrative law judge disagreed, leading to the court’s decision to vacate the rule.
The court stated that while it does not condone unfair and deceptive practices in negative option marketing, the procedural flaws in the FTC’s rulemaking process were insurmountable.
The FTC is now focusing on preparing for a trial involving Amazon’s Prime program, stemming from a lawsuit alleging that Amazon enrolled consumers in Prime without consent and made it challenging for them to cancel subscriptions. The trial is scheduled for next year. The FTC declined to comment on the recent developments.
