US Court of Appeals Blocks Click-To-Cancel Rule

On July 10, the US Court of Appeals blocked a “click-to-cancel” rule initially proposed by the Federal Trade Commission (FTC). The rule would have required companies operating in the US to make canceling a subscription service as easy as signing up for it.

The rule, which was set to take effect on July 14, was blocked after the 8th US Circuit Court of Appeals in St. Louis ruled that the FTC had failed to conduct a preliminary regulatory analysis. Under US law, this analysis is required for rules with a projected annual impact on the national economy of over $100 million.

“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 court wrote, adding that “vacatur of the entire Rule is appropriate in this case because of the prejudice suffered by Petitioners as a result of the Commission’s procedural error.”

The rule would have required US businesses, such as retailers and gyms, to provide easy-to-use cancellation methods for subscriptions, auto-renewals, and free trials that convert into paid memberships. It also would have prohibited companies from forcing users who sign up via app or website to cancel through a chatbot or a phone call with a representative.

A trade group representing telecom providers such as Charter Communications and Comcast, as well as media companies like Disney and Warner Bros., is currently suing to block the rule, alongside the US Chamber of Commerce.

This isn’t the first time trade groups representing telecom providers have sued to block regulation in the US. In early January, the Court of Appeals struck down net neutrality rules following a lawsuit by the United States Telecom Association. That rule would have prevented internet providers from giving preferential treatment to certain websites or apps.