FTC’s ‘click-to-cancel’ rule rejected by appeals court

A U.S. appeals court blocked a Federal Trade Commission (FTC) rule on Tuesday, July 8, requiring businesses to “make it as easy for consumers to cancel their enrollment as it was to sign up.” The FTC announced its final “click-to-cancel” rule in October 2024, targeting businesses that make it difficult for customers to cancel subscriptions and memberships.

The rule — passed under former Democratic FTC Chair Lina Khan — was set to take effect next Monday, July 14. However, the U.S. Court of Appeals for the Eighth Circuit in St. Louis blocked it, claiming the FTC failed to conduct a preliminary analysis of the rule’s costs and benefits.

The FTC argued it didn’t need a preliminary analysis because its initial impact estimate was less than $100 million threshold, according to The Hill. The court disagreed and sided with the rule’s petitioners.

The FTC has yet to comment on the appeals court ruling.

What did the ‘click-to-cancel’ rule aim to achieve?

“Click-to-cancel” would require retailers, gyms and other subscription-selling companies to make cancellation “at least as easy” as signing up. The rule would also require companies to document customers’ consent for subscriptions, auto-renewals and free trials that convert into paid memberships.

The FTC first announced its “click-to-cancel” rule proposals in March 2023. That announcement led to more than 16,000 consumer comments expressing frustrations over navigating companies’ cancellation processes.

“Sometimes you have to call customer service on the phone,” Khan wrote in an op-ed for The Hill published Oct. 24, 2024. “You spend an hour talking to a robot before you finally get through to a human being. Customer service transfers you to memberships, memberships transfers you to cancellations, then the call drops and you have to do it all over again.”

In an October 2024 statement, Khan said, “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

Trump appointed Andrew Ferguson to succeed Khan as the FTC chair in December 2024, after his November 2024 presidential election victory.

‘Click-to-cancel’ legal challenges

The rule has faced legal challenges since the FTC announced its implementation. Industry groups representing companies relying on subscription revenue filed an initial appeal on Oct. 23, 2024, just after the rules announcement.

Three groups submitted an appeal: the Electronic Security Association, which represents companies that install or monitor electronic security and safety devices; the Interactive Advertising Bureau, encompassing digital advertising and media leaders like Amazon, TikTok, LinkedIn and Disney; and the Internet and Television Association (NCTA).