Eighth Circuit Court of Appeals Strikes Down FTC’s Click-to-Cancel Rule
On July 8, 2025 — just eight months after the Federal Trade Commission (FTC or Commission) finalized the much-discussed Click-to-Cancel Rule (the Rule) (and then deferred the compliance date several times to July 14) — a federal appeals court struck down the Rule. As we discussed here, the Rule was intended to make it easier for consumers to cancel automatically renewing subscriptions (so-called “negative option” programs) by making available a “click-to-cancel” button. The Rule also required sellers to provide clear and conspicuous disclosures of material terms and obtain informed consent to a negative option before obtaining billing information and charging consumers. Industry associations and businesses criticized the Rule, calling it rushed, burdensome, and beyond the FTC’s statutory authority, and challenged it in several federal courts, culminating with the Eighth Circuit’s vacatur.
The Commission issued the final Rule by a 3-2 vote on November 15, 2024 (with the three Democratic commissioners then at the FTC voting in favor and the two Republicans voting against it), imposing new requirements “related to any form of negative option program in any media.” 16 C.F.R. § 425.1. Although the effective date of the Rule was originally January 14, 2025, businesses were given four additional months to comply. As we detailed here, days before the extended May 14 compliance date, the three sitting Republican commissioners now presiding over the FTC again deferred the compliance deadline to July 14. The Eighth Circuit’s July 8 order held that in its rulemaking process, the FTC failed to comply with the statutory mandate to provide a preliminary regulatory impact analysis when the effect of a rule is expected to surpass $100 million annually. The FTC argued that it was not required to provide such analysis because the Rule would not exceed $100 million annually, and that even if that conclusion was wrong, “any procedural error committed in not preparing one was ultimately harmless.” The court disagreed, finding that “the procedural deficiencies of the Commission’s rulemaking process are fatal here.”
As with other recent federal rules and regulations promulgated in the months before the change in presidential administrations, the future of the Click-to-Cancel Rule is unclear. Given that three current FTC commissioners are Republican and two of them — Chair Ferguson and Commissioner Holyoak — voted against the final Rule last year, it seems highly unlikely that this Commission will appeal the case to the Supreme Court.
It is clear that subscription services and offers are here to stay. According to one international market research firm, the “subscription economy” will generate $722 billion in revenues this year, and revenues could reach $1.2 trillion in 2030. Elimination of the federal Click-to-Cancel Rule may be welcome news for many businesses, but companies should be aware that several states have their own negative option/auto-renewal laws with varying requirements that businesses must address through their internal compliance programs. Furthermore, both the FTC and state Attorneys General have authority under the Restore Online Shoppers' Confidence Act (ROSCA) to enforce against unfair and deceptive acts and practices involving subscriptions. The FTC also has broad jurisdiction over unfair and deceptive acts and practices under Section 5 of the FTC Act, and state Attorneys General typically have similar broad authority under so-called “Little FTC Acts.” It thus remains important for businesses to be clear and upfront in presenting subscription and auto-renewal terms to consumers, including, in particular, assuring that cancellation steps are not overly burdensome.