FTC's Click-to-Cancel Rule Blocked by Court Over Procedural Error

The Federal Trade Commission's (FTC) proposed "click-to-cancel" rule, which aimed to simplify the process for consumers to cancel unwanted subscriptions and memberships, has been blocked by a federal appeals court just days before its implementation. The rule, part of the Biden administration's "Time is Money" initiative, required businesses to obtain explicit consent from customers before charging for memberships, auto-renewals, and programs linked to free trial offers. Additionally, businesses were mandated to disclose the end of free trials or promotional offers and allow customers to cancel recurring subscriptions as easily as they started them.

The FTC's rule was scheduled to take effect on Monday, but the U.S. Court of Appeals for the Eighth Circuit intervened, citing a procedural error. The court ruled that the FTC failed to conduct a preliminary regulatory analysis, which is mandatory for rules with an annual economic impact exceeding $100 million. The FTC argued that such an analysis was unnecessary because it initially estimated the rule's economic impact to be below the $100 million threshold. However, an administrative law judge determined that the impact would surpass this threshold, leading the court to vacate the rule.

The court's decision underscores the importance of adhering to regulatory procedures, even when the intent behind the rule is to protect consumers. The FTC's "click-to-cancel" rule was designed to address consumer frustrations with automatic renewals and difficult cancellation processes. By blocking the rule, the court highlighted the need for thorough regulatory analysis to ensure compliance with legal standards.

The FTC is now focusing on its preparations for a trial involving Amazon’s Prime program. The trial, expected to take place next year, stems from allegations that Amazon enrolled consumers in its Prime program without their consent and made it difficult for them to cancel their subscriptions. This ongoing legal battle reflects the broader efforts by regulatory bodies to hold companies accountable for their subscription practices and protect consumer rights.