A “click-to-cancel” regulation, which aimed to ensure that businesses provide a straightforward way for consumers to cancel unwanted subscriptions and memberships, has been halted by a federal appeals court just days before its scheduled implementation.
The Federal Trade Commission’s proposed amendments, introduced in October, mandated that businesses secure a customer’s consent prior to charging for memberships, auto-renewals, and programs associated with free trial offers.
The FTC also stated that businesses would need to clearly notify customers when free trials or promotional offers conclude and allow them to cancel ongoing subscriptions with the same ease as initiating them.
The rule was set to go into effect on Monday, but the U.S. Court of Appeals for the Eighth Circuit said this week that the FTC made a procedural error by failing to come up with a preliminary regulatory analysis, which is required for rules whose annual impact on the U.S. economy is more than $100 million.
The FTC claimed that it didn’t have to come up with a preliminary regulatory analysis because it initially determined that the rule’s impact on the national economy would be less than $100 million. An administrative law judge decided that the economic impact would be more than the $100 million threshold.
The court decided to vacate the rule.
“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,” the court wrote.
The FTC declined to comment on Wednesday.
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