In a major victory for legal clarity, the U.S. Court of Appeals for the Eighth Circuit has struck down the Federal Trade Commission’s “click-to-cancel” rule. This rule was intended to make the process easier for consumers seeking to unsubscribe from services. The ruling is a victory against subscription practices that have become a key concern. Businesses can read customer failure to act as agreement to the continuous bill, which poses significant risks associated with negative option marketing.
Among other things, the court found that the FTC did not comply with the requisite procedures outlined by the FTC Act. This oversight followed the rule-making process itself. There was a really unfortunate procedural step involved here. Due to this, the rule mandating that companies provide a cancellation option that is equal to the method in which a subscription was signed up for was struck down. The “click-to-cancel” rule was slated to go into effect on July 14, 2023.
Negative option marketing programs have come under increased fire for their ability to cause unintended fees for consumers. All of these practices exploit consumer inertia. Consequently, consumers are left with surprising recurring fees without even knowing they’re still subscribed. The FCC’s proposed rule would have fixed this by creating nearly universal protections for consumers across all media platforms.
The FTC has been overwhelmed with complaints about harmful subscription practices. Among these practices, in 2024, the agency was fielding almost 70 consumer complaints per day on these practices. This was an enormous increase from the 42 daily complaints that the agency took in 2021. This increase is disappointing and it emphasizes the increasing annoyance of consumers about convoluted cancellation procedures.
As of this writing, the New York Attorney General’s office is still considering whether to appeal the court’s decision to vacate the “click-to-cancel” rule. Letitia James has been on the offensive, suing companies for making it difficult to cancel. Her office won $600,000 in refunds and penalties from Equinox for making it difficult to cancel a monthly membership. On top of that, she recently won a lawsuit against SiriusXM for holding customers hostage in undesirable subscriptions.
“New Yorkers should never have to jump through hoops just to cancel an unwanted subscription.” – Letitia James
The ruling leaves consumers without clear protections for deceptive subscription practices, leading advocacy groups to call for tougher regulatory standards. Critics argue that without robust rules in place, companies may continue to exploit consumer confusion, leading to financial burdens on unsuspecting individuals.
Chief Judge Srinivasan’s opinion gives procedural integrity paramount priority in regulatory practice. It leaves some big unanswered questions that will shape the future of consumer protection efforts in the realm of subscription services. As state officials like James continue to search for alternatives and remedies for defrauded consumers, the future of subscription marketing is hazy at best.