Judges Strike Down “Click-to-Cancel” Rule

A federal appeals court has struck down the FTC’s “click-to-cancel” rule, saying the agency didn’t follow required legal procedures.

The U.S. federal court invalidated a new regulatory requirement that forced companies to let users cancel subscriptions as easily as they sign up for them, as first reported by ArsTechnica. The Federal Trade Commission (FTC) “click-to-cancel” rule was supposed to take effect July 14, but it’s now been blocked by the 8th Circuit Court of Appeals.

The court said the FTC, under Chair Lina Khan at the time, didn’t follow the legal rulemaking process. “While we certainly do not endorse the use of unfair and deceptive practices […] the procedural deficiencies of the Commission’s rulemaking process are fatal here,” the judges wrote.

The FTC had updated a decades-old rule which aimed to stop companies from deceptive practices by establishing clear terms and straightforward cancellation procedures. But Ars reports that it skipped a key step: doing a full economic analysis before finalizing the rule. The law says this is required when a rule is expected to have over $100 million in economic impact.

The internal judge issued a warning about excessive compliance costs, but the FTC chose not to release the analysis for public review before finalization. Ars reports that the judges determined that this procedural decision prevented businesses and industry organizations from providing timely feedback.

The ruling said allowing this shortcut could “open the door to future manipulation of the rulemaking process.”

Republicans on the FTC had opposed the rule from the start. One, Melissa Holyoak, warned it was rushed before the 2024 election and “may not survive legal challenge.” She referred to it as “nothing more than a back-door effort at obtaining civil penalties in any industry where negative option is a method to secure payment.”

In contrast, Ars reports that Lina Khan had said at the time, “Businesses make people jump through endless hoops just to cancel a subscription […] Nobody should be stuck paying for a service they no longer want.”