The Federal Trade Commission (FTC) Click-to-Cancel

Executive Summary

• The FTC’s Click to Cancel Rule has been postponed to July 14, 2025 (60-day extension)
• Rule applies to all subscription agreements with Negative Option Features in both B2B and B2C contexts.
• Key requirements: simplified cancellation processes, clear representations, and explicit consent mechanisms
• Maximum penalty of $51,744 per violation, with potential for multiple violations from a single transaction
• State laws are not preempted and may impose stricter requirements

Rule Overview and Recent Developments

The Federal Trade Commission (“FTC”) has recently announced that the FTC’s Click to Cancel Rule (the “Rule”) has been postponed to July 14, 2025. Originally planned to become effective May 14, 2025, the Commission released a brief statement subsequent to the postponement explaining that the extension was due to the complexities involved for businesses to become compliant.

Even though proceedings involving the Rule are currently pending in Federal court, the Commission also suggested that businesses should not expect any revision to or withdrawal of the Rule before July 14, 2025. In wake of these developments, it is encouraged that businesses take advantage of the 60-day extension and undergo necessary steps for compliance.

Scope of the Rule

The Rule encompasses a broad range of commercial activity across a broad spectrum of industries, including:

• Any business that offers recurring subscription services in both Business-to-Business (B2B) and Business-to-Consumer (B2C) context
• Subscriptions that auto-renew
• Free or discounted services that later evolve into regular subscriptions
• Subscriptions that rely on silence or non-action from the consumer as consent to continue to charge for the subscription (Negative Option Feature).

Compliance

In order to aid in compliance, we propose considering the points outlined below.

• What Agreements are Impacted? 
  • The Rule covers any agreement containing a Negative Option Feature, regardless of whether the agreement is B2B or B2C.
  • If a business utilizes auto-renewal in its agreements, then a right of action is created for any material misrepresentation(s) regarding the offer, whether it relates to the auto-renewal provision or not.
  • The maximum penalty per violation is $51,744, and the FTC may bring multiple violations from a single transaction.
  • Consumers in states with similar laws (discussed below) can also bring state law actions since the Rule is not preemptive.

• What Needs to Change in Agreements?
  • Cancellation – The method to cancel must be simple and at least as easy as the method used to enter the agreement, and must be presented in the same medium used to initiate the agreement.
    • If a company utilizes online sign-ups/subscriptions, it needs to implement online cancellation (in a simple manner) to comply. Contracts entered into in-person must allow cancellation online or over the phone.
  • Representations of Subscription – Clear and conspicuous representations of the agreement’s terms must be presented prior to collecting billing information.
  • Consent to charge – A company must evidence consent separately from the transaction (a tick box/radio button or similar means are recommended by FTC). A new disclosure must be provided prior to renewing a subscription (whatever the interval) and collecting billing information.
  • Prohibited “Dark Patterns” – The Rule and several states specifically ban “Dark Patterns,” which are methods companies use to manipulate consumers:
    • Examples of Prohibited Dark Patterns:
      • Pre-checked acceptance boxes
      • Misleading button colors/designs (e.g., making “continue subscription” more prominent than “cancel”)
      • Confusing language in renewal terms
      • Visual tricks that hide or minimize disclosure of subscription terms
      • Multiple pop-ups or pages are designed to discourage cancellation
      • Emotional manipulation tactics during the cancellation process
• State Law Considerations
  • A growing number of States have enacted or have pending effective dates for laws specifically addressing auto-renewals and cancellation (also known as “Auto-Renewal Laws or ARLs”). Please note that the Rule does not preempt state law, and some of these states provide for greater protections and stricter guidelines businesses must follow (such as a differing number of days for auto-renewal notice, bans on Dark Patterns, etc.).
•  General Guidance & Enforcement
  • In the context of B2B agreements, the FTC views small business consumers as similar to natural person consumers. Although the FTC has not clarified what is considered a “small business”, commentary indicates that larger companies selling to smaller businesses and who are willful in their non-compliance are at a higher risk for enforcement actions from the FTC.
  • It is suggested that all businesses, regardless of industry or subject matter, that offer subscriptions or utilize auto-renewals in their agreements, and/or those that suspect they are subject to the Rule, move toward compliance now, unless doing so poses a significant technical or operational burden.
  • Businesses that use different mediums for order forms may face burdens, and while many businesses are opting for the “wait and see” approach, this is not recommended.