Dive Brief:

• The Federal Trade Commission issued a final “click-to-cancel” rule on Wednesday to make it as easy for consumers to cancel recurring payments for products and services as it was for them to sign up. The amendment to the 1973 Negative Option Rule includes civil penalties designed to combat business practices that make it structurally difficult or unclear for consumers to end their participation in automatic renewal programs.
• The commission said it receives an average of 70 complaints per day, up from 42 daily in 2021. The agency said it collected 16,000 comments, from consumers, trade associations and state and federal agencies, since proposing the rule in March 2023. “Too often, businesses make people jump through endless hoops just to cancel a subscription,” Chair Lina Khan said Wednesday in a press release. “Nobody should be stuck paying for a service they no longer want.”
• Commissioners Melissa Holyoak and Andrew Ferguson dissented, with Holyoak accusing the majority of engaging “in blatant electioneering to advance political ends.” The U.S. Chamber of Commerce said it’s “considering all options” to ensure that Americans retain access to convenient and affordable subscription services.

Dive Insight:

The FTC rule affects a broad range of businesses, from monthly wine clubs to magazine subscriptions and internet and cable television providers.

The FTC rule also will prohibit sellers from misrepresenting any material facts while using negative option marketing, and imposes civil penalties for consumer recovery. It also will require sellers to obtain consumers’ informed consent to the negative option features of a program before it can charge them.

The rule also marks the first time the commission has sought civil penalties for deception claims, Holland & Knight noted in an analysis earlier this year of the proposed rule.

The FTC rule follows a similar California law, enacted in September. The effort comes as part of the Biden administration’s wider campaign against “junk fees,” which the president has said would save Americans more than $20 billion annually.  

The final rule has several changes from the proposal 18 months ago. It no longer requires sellers to give customers annual reminders of the negative option aspect of their subscription. The rule also no longer bars sellers from telling consumers wanting to cancel their subscription about plan modifications or reasons to keep their existing agreement without first asking if they want to hear these.

The chamber called the rule “the latest power grab by the Commission in its pursuit to micromanage business decisions.”

“Not only will this rule deter businesses from providing sensible, consumer-friendly subscriptions, but it will leave Americans with fewer options, higher prices, and more headaches,” Neil Bradley, the chamber’s executive vice president and chief policy officer, said in the statement.

In her dissent, Holyoak accused the chair of supporting the rule’s passage immediately before the U.S. presidential election, saying Khan was “hurrying to finish a rule that follows through on a campaign pledge made by the Chair’s favored presidential candidate.”

She also said the agency’s staff — and taxpayers’ funds — would likely be mired in litigation over the rule as companies challenge it.

The FTC issued a business advisory accompanying the final rule with several guidelines for companies that engage in such marketing:

• You can’t require people to speak with a representative to cancel if they didn’t have to do that to sign up.
• If you’re offering phone cancellation, you can’t charge extra for that service, and you must answer the phone or take a message during normal business hours. If you take a message, you have to respond to people promptly.
• If people originally signed up for your program in person, you can offer them the opportunity to cancel in person if they want to, but you can’t require it. Instead, you need to offer a way for people to cancel online or by phone.

Most of the new provisions take effect in 180 days, or mid-2025, after the rule is published.