FTC's "Click-to-Cancel" Rule Invalidated
The Federal Appeals Court for the 8th Circuit invalidated the Federal Trade Commission’s (FTC) “click-to-cancel” (aka “negative option”) rule. The rule, if it went into effect, would have required providers of subscription services with automatic renewals or that automatically convert to a paid subscription after a free trial provide an easy mechanism for the consumer to cancel the subscription or a trial period. It also required certain disclosures to consumers that they will be automatically charged when the current subscription (or trial) period ends, any deadlines to cancel, the amount of ongoing charges (and potential increases), and how to easily cancel. Notably, the rule also applied to B2B relationships and could have impacted most license agreements and other relationships with automatic renewals.
A challenge was brought by various industry groups and businesses, including a number of cable companies. A three-judge panel of the court unanimously agreed that the rule violated the procedural requirements for a preliminary regulatory analysis when the rule has an estimated annual economic effect of $100 million or more. While the FTC originally estimated that the rule did not meet this threshold, an administrative law judge later found that it would meet this threshold unless affected businesses could implement this with very little professional services, which is unlikely. The FTC proceeded with the rulemaking in light of the administrative law judge’s ruling.
It is unlikely that the FTC will renew its efforts to pass this rule. Since its original passing in October 2025 (by a 3-2 vote, with Republican-appointed Commissioners dissenting), President Trump has fired the two Democrats who remained on the Commission after Chairperson Lina Khan’s departure. The new Chairperson, Andrew Ferguson, is one of the dissenting votes.
However, businesses are not out of the woods yet. Most states have enacted their own “negative option” laws that are still in full force and effect and must be complied with. While some of these are limited in scope (i.e., gym memberships and similar services), some have broad applicability.
A federal appeals court today struck down a “click-to-cancel” rule that would have required companies to make cancelling services as easy as signing up. The Federal Trade Commission rule was scheduled to take effect on July 14 but was vacated by the US Court of Appeals for the 8th Circuit.
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