US court cancels FTC rule that would have made canceling subscriptions easier

A federal appeals court has overturned a proposed "click-to-cancel" regulation that aimed to simplify the process of terminating subscriptions. This rule, introduced by the Federal Trade Commission (FTC), was set to be implemented on July 14, but the US Court of Appeals for the 8th Circuit deemed it invalid due to procedural missteps. In a unanimous decision, the three-judge panel determined that the FTC, under the leadership of Chair Lina Khan during the Biden administration, did not adhere to the comprehensive rulemaking process mandated by US law. The ruling emphasized the importance of procedural integrity, stating, "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 judges acknowledged the FTC's intentions, recognizing that many consumers have unintentionally been enrolled in recurring subscription services, resulting in ongoing payments for products or services they did not want. Last year, the FTC attempted to enhance its 1973 Negative Option Rule by introducing measures to prohibit misleading representations and to ensure clear disclosure of terms, explicit consumer consent, and an easier cancellation process. The FTC was obligated to undertake a preliminary regulatory analysis for any rule expected to significantly impact the economy, with a threshold of $100 million. Although the FTC initially estimated the proposed rule would not meet this threshold, an administrative law judge later concluded that compliance costs could indeed surpass $100 million unless businesses limited their professional service hours. Despite this finding, the FTC failed to perform the required preliminary analysis and instead issued only the final regulatory assessment with the completed rule, as noted by the judges in their ruling.