A “click-to-cancel” rule, which would have required businesses to make it easy for consumers to cancel unwanted subscriptions and memberships, has been blocked by a federal appeals court just days before it was set to go into effect.
The Federal Trade Commission's proposed changes, adopted in October, required businesses to obtain a customer's consent before charging for memberships, auto-renewals and programs linked to free trial offers.
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The FTC said at the time that businesses must also disclose when free trials or other promotional offers will end and let customers cancel recurring subscriptions as easily as they started them.
The administration of President Joe Biden included the FTC’s proposal as part of its “Time is Money” initiative, a governmentwide initiative that was announced last year with the aim of cracking down on consumer-related hassles.
The FTC 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 did not 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.
The agency is currently moving forward with its preparations for a trial involving Amazon’s Prime program. The trial stems from a Federal Trade Commission lawsuit that accused Amazon of enrolling consumers in its Prime program without their consent and making it difficult for them to cancel their subscriptions.
The trial is expected to take place next year.