Court blocks FTC ‘click to cancel’ rule designed to ease unsubscribing
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A federal appeals court has voided Biden-era plans to crack down on tough-to-cancel subscriptions, which would have required businesses to make it as easy to cancel subscriptions as it is to sign up to them.
On Tuesday, the U.S. Court of Appeals for the 8th Circuit in St. Louis granted a petition from business groups to block the Federal Trade Commission’s rule, known colloquially as “click to cancel,” days before its scheduled date of enforcement of July 14. The court found the FTC made “fatal” procedural errors in its rulemaking process and struck down the rule.
The rule in question, announced last October by the FTC under then-Chair Lina Khan, would have required companies selling subscriptions such as gyms and streaming platforms to make the cancellation process take as few steps as signing up. It would have also required sellers to provide all relevant information to consumers before subscribing. Companies violating the rulewouldbe subject to civil penalties.
Consumer rights groups had welcomed the rule as a safeguard to prevent customers from getting trapped into paying for a service they no longer wanted with no straightforward way to cancel their subscription. In 2024, the FTC said it was receiving an average of 70 complaints a day about the issue. “The FTC’s rule will end these tricks and traps, saving Americans time and money,” Khan had said at the time.
But it was also fiercely opposed by business groups, which argued that the “click to cancel” rule overstepped the FTC’s mandate and would burden businesses with unfair costs and regulatory requirements. A vote at the time by the FTC’s commissioners fell along party lines,with the two Republican commissioners opposing the change.
Industry associations and business groups, including the U.S. Chamber of Commerce and National Federation of Independent Business, led challenges to the rule in four federal circuit courts, arguing that the FTC had exceeded its statutory authority, failed to satisfy rulemaking procedures, and breached administrative law. A judicial panel then consolidated the petitions for review by the U.S. Court of Appeal for the 8th Circuit.
On Tuesday, the appeals court granted the petitioners’ request to vacate the “click to cancel” rule in full. It found that the FTC failed to satisfy a critical procedural requirement by declining to conduct a preliminary regulatory analysis setting out alternatives to the proposed rule, and projected benefits and adverse economic effects. A preliminary regulatory analysis is required for proposed rules where the annual impact on the national economy is forecast to exceed $100 million. The FTC had initially estimated that the costs would not exceed the threshold, and did not issue a preliminary regulatory analysis after the estimate was amended, only issuing a final regulatory analysis later, alongside its final rules.
“Excusing the Commission’s noncompliance with [the requirement] could open the door to future manipulation of the rulemaking process,” the court said. “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.”
Dotan Hammer, a partner at Pearl Cohen law firm who specializes in data and cyber regulation, said that the court ruling meant that the FTC would have to “go back and repeat most of the rulemaking process” if it decided to reissue the “click to cancel” rule.
“It’s difficult to speculate a timeline for this, but it’s hard to imagine that it can be completed in any less than 4-6 months. Certainly, the court’s decision vacating the rule means a delay in the rule’s reissuance and enforcement at least into 2026,” he wrote in emailed comments Wednesday.
The FTC declined to comment.