In this article, we first describe the Federal Trade Commission’s (“FTC’s”) final “click-to-cancel” rule (hereafter “Rule”), which is expected to become effective in 2025. We then discuss the legal challenges the FTC has faced in implementing the Rule, including the legal and economic arguments thus far presented by the relevant parties. We conclude by discussing additional potential implications of the Rule for businesses and consumers.
In October 2024, the FTC announced its intent to improve consumer protection from what it considered unfair and deceptive marketing practices related to recurring subscription charges by announcing its “click-to-cancel” rule. The Rule is intended to modernize the FTC’s 1973 Negative Option Rule, which was designed to increase transparency between businesses and consumers and require businesses to provide a simple way for consumers to decline or cancel purchases in “negative option” settings (i.e., when inaction is treated as acceptance). According to the FTC, the Rule targets four specific forms of potential abuse by businesses: (1) material misrepresentations, (2) failure to provide important information, (3) lack of informed consumer consent, and (4) failure to provide consumers with a simple cancellation method.
Specifically, the Rule:
Unlike earlier rules that applied only to certain types of business transactions (e.g., online or through telemarketing), the FTC’s “click-to-cancel” rule applies to all business transactions, whether occurring online, over the phone, in person, or in print. The FTC has estimated that the Rule will impact approximately 106,000 businesses.
The FTC initially required compliance with the Rule by May 14, 2025. But on May 9, 2025, citing “the complexity of compliance” and “[t]o ensure ample time for companies to conform their conduct to the Rule,” the FTC deferred the required compliance date to July 14, 2025.
The FTC’s Rule has faced multiple legal challenges by various industry groups and trade associations, including the Electronic Security Association, the Michigan Press Association, and the U.S. Chamber of Commerce, among others. Four of these cases have been consolidated in the Eighth Circuit.,
On January 17, 2025, the Eighth Circuit, in a 2-1 decision, denied a petition to administratively stay the Rule pending the outcome of the litigation. President Trump’s order of February 18, 2025, “Ensuring Accountability for All Agencies,” which called for a review of all executive departments’ and agencies’ “proposed and final significant regulatory actions,” raised questions as to whether the FTC would continue to pursue the implementation of its proposed Rule. But on March 17, the FTC filed a brief with the Eighth Circuit defending the Rule. On March 24, the Court notified the parties that the consolidated case had been screened for oral argument.
Petitioners have made three primary arguments in opposition to the Rule. First, Petitioners contend that the FTC has exceeded the authority granted to it by Congress by issuing a rule that applies broadly to all businesses that operate throughout the U.S. economy. They argue the FTC is only authorized to issue “specific” rules targeting “prevalent” unfair or deceptive practices within certain industries, that the FTC has not provided evidence of such practices across all affected industries, and that it has thus failed to meet the statutory requirement that any regulated practice be widespread. Petitioners further criticize the Rule for unlawfully overriding existing, more targeted federal statutes, including those for “specific industries that use recurring subscriptions” and “recurring subscriptions only over a specific medium: the internet.”
Second, Petitioners allege the Rule is procedurally improper because the FTC failed to issue a preliminary regulatory analysis “before issuing ‘final regulatory analysis,’” which Petitioners allege is required for rules expected to “affect the economy by $100 million or more annually.” This, Petitioners argue, deprived the public of an opportunity to review and comment on the costs, benefits, and alternatives to the proposed Rule, which the FTC is required to do to ensure transparency and regulatory discipline.
Third, Petitioners claim the Rule is “arbitrary and capricious” because the FTC failed to adequately consider how certain aspects of the Rule would function in practice, how it would apply to certain industries, and how compliance would be assessed. Petitioners point to the Rule’s requirement that businesses provide cancellation options that are “at least as simple as” the mechanism the customer used to give consent, and contend there are no specific guidelines for how ease of use would be assessed. Petitioners also point to industries such as the home security sector, where, for safety reasons, identity verification or other steps are often required to cancel services (e.g., to prevent accidental cancellation or cancellation by bad actors). Petitioners also allege that the Rule has imposed impractical mandates—such as requiring separate consent for subscription features—that are confusing or burdensome in some business contexts.
The FTC argues regulatory action is needed to reduce harm to consumers from deceptive and unfair practices related to recurring subscription charges, including misrepresenting subscription terms, failing to clearly disclose recurring charges, not obtaining meaningful consent before billing, and making the cancellation process intentionally difficult. The FTC further cites what it considers to be widespread support for the Rule from consumer protection groups (e.g., the Consumer Financial Protection Bureau and Truth in Advertising, Inc.) and state attorneys general who have expressed frustration with certain businesses’ cancellation processes (“including the ‘lack of informed consumer consent, lack of clear and conspicuous disclosures, failure to honor cancellation requests and/or refusal to provide refunds to consumers who unknowingly enrolled in plans’”).
In response to Petitioners’ contention that the Rule is overly broad, the FTC argues that the Rule instead targets four specific business practices related to recurring subscription charges. Although it is broader than prior rules that apply only to online transactions, the FTC claims the scope of the Rule is necessary to protect consumers, since existing rules failed to “‘reach most modern negative option marketing,’ and case-by-case enforcement has proven insufficient to deter ‘problematic negative option practices.’”
The FTC further argues that the FTC Act and legal precedent allow it to regulate “industry-agnostic or multi-industry rules” when a marketing strategy—such as use of a negative option feature—cuts across industries. This practice, the FTC contends, is consistent with its previous rules, including the original 1973 Negative Option Rule, which applied to “the sale, offering for sale, or distribution of goods and merchandise in commerce,” and the 1975 Mail Order Rule, which requires sellers to have a reasonable basis for stated shipping times and applies to “[c]ountless industries.”
According to the FTC’s analysis, the Rule’s benefits to consumers outweigh the costs to businesses. It estimates the Rule will result in consumer benefits primarily in the form of time savings and fewer unwanted subscription charges. These benefits, it estimates, are equal to between $0.46 and $2.39 per subscription cancellation that is currently made by phone or online, and that the Rule will make simpler. The estimated benefits are equal to as much as $312.82 per subscription cancellation that is currently made in person, and for which the Rule will require a simpler online or by-phone option. In total, over a 10-year period, the FTC estimates a present value of consumer benefits of $6.1 billion to $49.3 billion.
In contrast, the FTC projects the Rule will cost businesses $49.5 million to $422.3 million in the Rule’s first year from time spent on legal and managerial review of the Rule, changing disclosures and cancellation processes, and recordkeeping. Businesses will incur additional costs over time for ongoing compliance, such that over a 10-year period, the FTC estimates a present value of costs to businesses of $100.9 million to $826.2 million.
In addition to the arguments presented thus far by Petitioners and the FTC, there may be additional effects of the Rule on consumers and businesses.
First, the Rule may restrict some businesses’ ability to interact with customers during the cancellation process. This could, in turn, limit these businesses’ ability to explain the consequences of cancellation or intervene to avoid potentially harmful service disruptions, which could be particularly important in industries such as home security or medical alert services, or where products and services are commonly purchased in bundles (e.g., cable and internet packages). Limiting businesses’ ability to interact with customers during the cancellation process may also provide consumers with fewer opportunities to learn about alternative subscription options. Businesses may have fewer opportunities to compete through promotional or discounted subscription offerings during the cancellation process, but that may, in turn, lead to more competitive offerings and pricing strategies at the sign-up stage.
Second, some businesses may reduce their offerings of subscription-based products and services if they cannot afford to comply with the Rule’s terms. This could limit consumers’ ability to explore and evaluate new products and services. On the other hand, requiring faster and easier cancellation processes may increase consumers’ willingness to explore and purchase new subscription products, facilitate more consumer switching between products and services offered by different businesses, and thus incentivize greater competition among businesses offering subscription-based products and services.
Overall, the FTC’s Rule is aimed at benefiting consumers by curbing what it considers to be unfair and deceptive marketing practices, and businesses will need to adapt by adjusting their recurring subscription cancellation processes. It will be important to continue following the legal challenges the FTC faces to understand whether the Rule will continue to be effectuated in its current form.
