Industry Groups Urge FTC to Revive Click-to-Cancel Rulemaking on Subscription and Negative Option Plans

Two association groups, the Consumer Federation of America (CFA) and the American Economic Liberties Project (AELP), recently submitted a Petition for Renewed Click to Cancel Rulemaking attempting to restart the Federal Trade Commission’s (FTC) rulemaking process. The petition asks the FTC to revive the rulemaking process by reopening the Rule Concerning Subscriptions and Other Negative Option Plans, often referred to as the “Click-to-Cancel” rule.

In July, a federal appeals court vacated the Click-to-Cancel rule, holding that it exceeded the scope of the FTC’s authority, was not promulgated in accordance with necessary rulemaking procedures, and was overly broad.

Why Consumer Advocates Want Renewed FTC Rulemaking on Negative Option Plans

In their November petition, the CFA and AELP argued that the Click-to-Cancel rule remains necessary, given the prevalence and economic impact of subscription services and negative option programs in today’s economy. While acknowledging federal law under the Restore Online Shoppers’ Confidence Act (ROSCA) currently regulates certain negative option plans sold online, the petitioners argued that the Click-to-Cancel Rule would impose more broadly applicable and specific requirements.

The proposed rule would prohibit sellers from misrepresenting any material fact in connection with promoting or offering for sale any good or service with a negative option feature. The rule would also require these sellers to disclose all material terms related to the negative option plan and obtain the consumer’s express informed consent to the negative option features. The rule also prescribes specific methods for offering a simple cancellation mechanism (thus the monicker “Click-to-Cancel” rule).

Recent FTC and State Enforcement Trends Under ROSCA and Autorenewal Laws

Even after the court vacated the Click-to-Cancel rule, the FTC has continued to bring enforcement actions under ROSCA, prominent examples being cases against Uber, which multiple state attorneys general joined this week. The agency also recently settled a case with Chegg for $7.5 million in which the FTC alleged that the company made it difficult for consumers to cancel their recurring subscriptions.  State regulators also continue to update and enforce their state autorenewal laws, for example the New York attorney general’s recent settlement with Equinox, a 34-state settlement with JustFab, and Pennsylvania’s settlement with Just Mint.

Venable’s Autorenewal Solutions Team (VAST) advises companies on complying with the varied and complex laws and regulations governing negative option, autorenewal, and subscription plans and guides clients through investigations and lawsuits involving the FTC and state attorneys general, as well as class action lawsuits and demands.

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