FTC's 'Click to Cancel' Rule Blocked by Court

The "click-to-cancel" rule, finalized by the U.S. Federal Trade Commission (FTC) last October, aimed to make canceling subscriptions, memberships, and auto-renewing services as easy as signing up for them. It targeted "negative option" marketing, where consumer inaction is interpreted as consent to continue charges, covering subscriptions, free trials, and recurring payment plans. 

The rule required businesses to provide simple, accessible cancellation methods—matching the signup process (e.g., online signups must allow online cancellations without requiring interaction with agents or chatbots). It also mandated clear disclosures, consumer consent for charges, and record-keeping of consent for three years, with penalties up to $51,744 per violation. 

The rule was set to take effect on July 14, 2025, after a delay from May 2025.

On Tuesday, the U.S. Court of Appeals for the Eighth Circuit struck down the rule, just days before its enforcement. The court ruled unanimously that the FTC, under former Chair Lina Khan, failed to follow proper rulemaking procedures under the FTC Act, specifically by not conducting a required preliminary regulatory analysis for rules with an economic impact exceeding $100 million annually. 

Despite the FTC’s claim that the rule’s impact was below this threshold, an administrative law judge later found compliance costs would exceed it, and the FTC proceeded without the mandated analysis.

The court deemed this procedural flaw "fatal," vacating the entire rule, as it prejudiced businesses challenging the regulation.

The decision was a victory for industry groups, including the U.S. Chamber of Commerce and trade associations representing cable, internet, and media companies like Comcast, Disney, and Warner Bros. Discovery, who argued the rule was overly burdensome and exceeded the FTC’s authority.