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Federal Court Overturns New ‘Click to Cancel’ Subscription Rule

A federal rule aimed at simplifying subscription cancellations has been struck down by the U.S. Eighth Circuit Court of Appeals. The court vacated the rule previously ratified by the Federal Trade Commission (FTC), which sought to ensure that canceling a subscription would be as straightforward as signing up for one.

The rule, which emerged after California implemented its own “click to cancel” law, was designed to curb practices that made it unnecessarily difficult for consumers to unsubscribe from services. The FTC’s initiative followed numerous complaints regarding companies implementing convoluted cancellation processes. Commission Chair Lina M. Khan stated, “Too often, businesses make people jump through endless hoops just to cancel a subscription. The FTC’s rule will end these tricks and traps, saving Americans time and money.”

To mitigate consumer frustration, the proposed rule included several key requirements for subscription services. Businesses would need to clearly disclose all material facts, inform customers that subscriptions would continue until canceled, obtain express consent for automatic renewals, and ensure that cancellation processes were as easy as the signup process.

Despite its intentions, the rule faced significant criticism and was ultimately weakened before it could be enforced. Initial drafts included provisions requiring companies to send annual reminders about active subscriptions, aimed at addressing consumer forgetfulness. This requirement was removed, along with a clause that would have prohibited companies from attempting to persuade customers to maintain their subscriptions with incentives like discounted offers.

The FTC had initially scheduled the rule to take effect on May 14, 2024. However, enforcement was postponed by two months, pushing the new date to July 14, 2024. As enforcement approached, the FTC indicated a willingness to amend the rule if problems arose during implementation.

Following the court’s decision, a number of companies and trade associations that opposed the rule successfully argued that procedural errors rendered it unenforceable. The court’s ruling highlighted these deficiencies, stating, “the only practical response was to vacate it entirely.” This ruling raises questions about the future of similar regulations in the current political climate, as the likelihood of reintroducing a revised version of the rule appears diminished.

The FTC’s exploration into subscription practices, particularly with companies like Adobe, highlights ongoing concerns regarding consumer rights in the digital marketplace. As the landscape of online subscriptions continues to evolve, the necessity for clear, consumer-friendly practices remains a focal point for advocacy groups and regulators alike.

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