A federal appeals court has blocked a “click-to-cancel” rule just days before it was scheduled to take effect. The rule would have required businesses to make it easier for consumers to cancel subscriptions and memberships they no longer want.
The Federal Trade Commission adopted the changes in October, mandating that businesses obtain clear consent from customers before charging them for memberships, auto-renewals, or programs connected to free trial offers. The rule also required businesses to inform customers when free trials or promotional offers would end and to make it just as simple to cancel a subscription as it was to sign up.
President Joe Biden’s administration included the rule as part of its broader “Time is Money” initiative, a governmentwide effort announced last year to reduce consumer frustrations and eliminate unnecessary obstacles.
Although the rule was set to go into effect on Monday, the U.S. Court of Appeals for the Eighth Circuit ruled this week that the FTC had committed a procedural misstep. The court said the agency failed to provide a preliminary regulatory analysis, which is required for any rule expected to have an economic impact exceeding $100 million annually.
The FTC had argued it wasn’t required to prepare that analysis, having initially concluded the rule would fall below the $100 million threshold. But an administrative law judge later determined the economic impact would exceed that amount.
In its opinion, the court stated: “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.”
As a result, the rule was vacated. The FTC declined to comment on the decision Wednesday.
Meanwhile, the agency is continuing its preparations for a trial against Amazon over its Prime subscription service. The FTC has accused Amazon of enrolling users in Prime without their consent and making it difficult for them to cancel.