Business Groups Rush to File Federal Court Challenges to the FTC’s Negative Option “Click-to-Cancel” Rule

As we previewed last week, industry and trade groups wasted no time in filing challenges against the Federal Trade Commission’s (FTC) Final Negative Option Rule.

The Michigan Press Association and the National Federation of Independent Businesses filed a petition challenging the rule in the Sixth Circuit Court of Appeals, while a separate petition was filed by multiple trade associations in the Fifth Circuit. Both cases have asked federal courts of appeals to determine whether the FTC’s issuance of the rule exceeded the agency’s authority and if the FTC’s processes were arbitrary, capricious, and an abuse of discretion under the Administrative Procedure Act. The petitions also ask the courts to determine if the FTC complied with the agency’s Magnuson-Moss rulemaking requirements, claiming the rule was “unsupported by substantial evidence” and based on determinations that did not allow for consideration of “disputed material facts.”

The petitions request that the courts vacate and set aside the rule. If either petition is granted, the FTC will not be able to enforce its Negative Option Rule.

Additional challenges to the FTC’s Negative Option Rule might continue. And similar challenges against FTC rules have found success; for example, the FTC’s Non-Compete Rule was set aside and ruled unenforceable nationwide. That decision is currently on appeal at the Fifth Circuit.

The authors would like to thank law clerk Bryana Bowman for her assistance in writing this post.

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