The Federal Trade Commission (FTC) published its final “Click-to-Cancel” Rule in the Federal Register on November 15, 2024, meaning that companies should ensure that they comply with the rule’s requirements within the next 180 days, or by May 14, 2025.
The Click-to-Cancel Rule applies to subscription services and other offers that require a consumer to cancel in order to avoid incurring additional charges – what the FTC refers to as “negative options.” The Click-to-Cancel Rule, which passed by a 3-2 vote, amends the FTC’s prior Negative Option Rule by defining four separate practices as unfair and deceptive within the meaning of the FTC Act.[i]
- Click-to-Cancel: The rule’s namesake provision requires that it be just as easy to cancel a subscription or service as it is to sign up, and through the same medium (§ 425.6).[ii] For example, if a consumer signed up online, they must be able to cancel online and cannot be required to interact with a live or virtual representative, like a chatbox, in order to cancel.
- Consent: The rule requires that sellers of products with negative option features obtain specific consumer consent for the negative option feature “separately from any other portion of the of the transaction” and before charging the consumer (§ 425.5).[iii]
- Disclosure: The rule requires disclosure of material information – including the material terms relating to the negative option offer – before obtaining the consumer’s billing information or charging them (§ 425.4). While this requirement already exists in the Restore Online Shoppers’ Confidence Act (ROSCA), the rule requires that the disclosure must be immediately adject to the means of obtaining consent, e.g., next to a check box.
- Misrepresentations: The rule prohibits “misrepresentations of material fact” when marketing products or services with negative option features (§ 425.3). The rule applies both to express or implied misrepresentations, including as to the negative option feature, cost, purpose or efficacy, health, or safety of the underlying good or service.
The Click-to-Cancel amendments above bring the FTC’s Negative Option Rule into alignment with state autorenewal laws, several of which were passed or amended this fall, as we previously reported here.
The Click-to-Cancel rule also has a wider reach than past FTC pronouncements. It applies to companies offering “automatic renewal[s],” “continuity plan[s],” “free-to-pay conversion[s],” “fee-to-pay conversion[s],” or “pre-notification negative option plans.”[iv] The rule is set to become effective on January 14, 2025,[v] although companies have until May 14, 2025 to come into compliance with the four requirements above.[vi] The FTC rule does not distinguish between business-to-consumer versus business-to-business offerings, and thus companies should assume that both fall within the rule’s scope.
Commissioners Holyoak and Ferguson voted against the final rule. In her dissenting statement, Commissioner Holyoak mostly addressed the misrepresentation provision. Commissioner Holyoak further argued that the FTC’s rulemaking process here did not meet various procedural requirements from Section 18 of the FTC Act because: (1) the Click-to-Cancel rule’s Advanced Notice of Proposed Rulemaking (ANPR) was narrower than the final rule; (2) the FTC did not specifically identify unfair or deceptive practices; and (3) the FTC did not identify the prevalence of any such practices.[vii] Commissioner Holyoak also believed that the scope of the rule’s misrepresentation ban would cause businesses to rethink using a negative option feature, which she believed would harm consumers.[viii] Commissioner Ferguson is expected to release a separate dissenting statement but has not done so as of this posting.[ix]
Industry groups have filed petitions challenging the Click-to-Cancel Rule. The Electronic Security Association, Interactive Advertising Bureau, and NCTA filed a petition in the U.S. Court of Appeals for the Fifth Circuit (Case No. 24-60542). The Chamber of Commerce for the United States and the Georgia Chamber of Commerce filed a challenge in the U.S. Court of Appeals for the Eleventh Circuit (Case No. 24-13436). The Michigan Press Association and the National Federation of Independent Businesses, Inc. filed a similar petition in the U.S. Court of Appeals for the Sixth Circuit (Case No. 24-3912).
All three petitions call the FTC’s rule “an attempt to regulate consumer contracts for all companies in all industries and across all sectors of the economy” based on subscriptions irrespective of companies’ disclosures and say it creates “onerous” new regulatory obligations. The associations say the rule is arbitrary and are asking the appeals courts to vacate and enjoin the regulation. The Electronic Security Association, Interactive Advertising Bureau, and NCTA have also filed a petition to stay with the FTC that has not yet been addressed.
Separate from these petitions, there is also the possibility that Congress passes a joint resolution of disapproval invalidating this rule under the Congressional Review Act (“CRA”).[x] Since the Click-to-Cancel rule was issued so close to the end of this congressional session, the rule is subject to the CRA’s lookback provision, which will give the 119th Congress 60 calendar days from the 15th session (Senate) or legislative (House) day of the next congressional session to introduce a joint resolution.[xi] This date cannot be estimated until the schedule for the 119th Congress is released.
[i] Negative Option Rule, 89 Fed. Reg. 90,476, 90,476 (Nov. 15, 2024) (to be codified at 16 C.F.R. pt. 425).
[ii] Id. at 90,476, 90,539.
[iii] Id. at 90,476, 90,538–39.
[iv] Id. at 90,538.
[v] 89 Fed. Reg. at 90,476.
[vi] Id.
[vii] Id. at 90,540.
[viii] Id.
[ix] See Press Release, Fed. Trade Comm’n, Federal Trade Commission Announces Final “Click-to-Cancel” Rule Making It Easier for Consumers to End Recurring Subscriptions and Memberships (Oct. 16, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring.
[x] See 5 U.S.C. § 802.
[xi] Id. § 801(d).
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