FTC's Click-to-Cancel Rule Canceled by Eighth Circuit Ruling

The Federal Trade Commission's ambitious Click-to-Cancel rule, which would have required businesses to make subscription cancellations as easy as sign-ups, has been struck down by the Eighth Circuit Court of Appeals.

On July 8, 2025, the court issued a per curiam opinion vacating the rule, citing "fatal" procedural deficiencies in the FTC's rulemaking process. The decision represents a significant setback for consumer protection advocates and marks the end of a contentious legal battle that consolidated multiple industry challenges across federal circuits.

The Original Negative Option Rule

Negative option marketing refers to business practices where a customer's silence or failure to take affirmative action is interpreted as acceptance of recurring charges, and encompasses arrangements such as automatic renewals, continuity plans, free-to-pay trial conversions, and prenotification plans.

The original Negative Option Rule was enacted by the FTC in 1973 primarily to address the prenotification negative option plans that were prevalent at the time. Sellers operating such plans would provide periodic notices to participants offering certain merchandise and send the merchandise to those participants who failed to take any action to decline the offer. The most common example of this type of arrangement was the traditional book-of-the-month club.

The 1973 rule required prenotification plan sellers to meet several specific disclosure and procedural requirements, including minimum purchase obligations, rejection rights, and their right to cancel the plan. However, the specific type of prenotification plans addressed by the original rule only involved the sale of physical goods (books, records, CDs, etc.) and have long since fallen from favor in the digital economy of the 21st century.

This limited scope meant that other forms of negative option marketing that have become common in the digital age—such as automatic renewals, continuity plans, and free trial (i.e., free-to-pay or nominal-fee-to-pay) conversion offers—were not covered by the original rule and required regulation under other legal frameworks until the FTC’s recent attempt to modernize the rule in 2024.

The Click to Cancel Rule

The amended Negative Option Rule (which later became known as the Click-to-Cancel rule), was finalized by the FTC in October 2024. The rule was designed to modernize the original Negative Option Rule to address the proliferation of subscription-based services and automatic renewals in the digital economy.

The FTC's decision to update the rule came in response to escalating consumer complaints submitted to the FTC, which in 2024 rose to 70 complaints per day about subscription cancellation issues. The commission collected over 16,000 public comments during the rulemaking process that began in March 2023. The Click-to-Cancel rule contained four main requirements that would have applied to almost all negative option programs across all media, including business-to-business transactions:

1. Simple Cancellation Mechanisms: Companies would have been required to provide cancellation methods that were "at least as easy to use" as the original sign-up process. If customers signed up online, they would have been able to cancel online without being forced to interact with customer service representatives.
2. Clear Disclosures: Businesses would have needed to "clearly and conspicuously disclose material terms" before obtaining consumers' billing information, including cancellation deadlines, charge amounts and frequency, and how to find cancellation options.
3. Express Informed Consent: Companies would have been required to obtain consumers' "express informed consent" to negative option features separately from other transaction elements, maintaining records of such consent for three years.
4. Prohibition on Misrepresentations: The rule would have banned "misrepresentations of material fact" when marketing products or services with negative option features, a provision that took effect in January 2025.

The Legal Challenge and Consolidation

Multiple industry groups, including the U.S. Chamber of Commerce, Electronic Security Association, Interactive Advertising Bureau, Michigan Press Association, and numerous other trade organizations launched coordinated legal challenges immediately after the rule's adoption. Initially filed across multiple circuits, these cases were consolidated in the Eighth Circuit through multidistrict litigation procedures to a single case: Custom Communications Inc. v. Federal Trade Commission.

The challengers argued that the rule was "arbitrary, capricious, and an abuse of discretion" under the Administrative Procedure Act, and that the FTC exceeded its statutory authority under the Magnuson-Moss Act, which limits the agency to issuing "specific" rules targeting "prevalent" unfair or deceptive practices.

Central to the court's ultimate decision to vacate Click-to-Cancel was the FTC's failure to conduct a Preliminary Regulatory Analysis (PRA), which is required under Section 22(b)(1) of the FTC Act for any proposed rule expected to have an annual economic impact of at least $100 million. A PRA must also include a cost-benefit analysis and consideration of reasonable alternatives. The FTC initially estimated the rule's impact below $100 million but later accepted a finding that it would exceed this threshold yet never issued the required analysis.

Consumer Protection Implications

While the FTC can still pursue enforcement actions under existing laws like the Restore Online Shoppers' Confidence Act (ROSCA) and Section 5 of the FTC Act, the court order vacating Click-to-Cancel leaves consumers without a comprehensive federal framework protecting them from the type of practices the rule was designed to address.

However, several states have enacted their own automatic renewal laws for the same purpose, although with requirements that vary from state to state. For example, on July 1st, California's updated Automatic Renewal Law took effect, which requires clear disclosures, affirmative consent, and easy cancellation mechanisms along the same lines as Click-to-Cancel. New York and other states have enacted similar protections, but the absence of uniform federal standards creates compliance challenges for businesses operating across multiple jurisdictions.

Industry Response and Future Outlook

Industry groups celebrated the Eighth Circuit's decision as a victory against regulatory overreach. The U.S. Chamber of Commerce, which led the consolidated challenge, argued that the rule would have imposed "burdensome requirements on almost any business that offers a subscription plan."

As for the future, the decision likely signals broader judicial skepticism toward agency rulemaking in the post-Loper Bright era. To recap the Supreme Court's 2024 Loper Bright Enterprises v. Raimondo decision, it eliminated the longstanding doctrine of Chevron deference, requiring courts to exercise independent judgment in interpreting statutory provisions rather than deferring to agency interpretation.

The FTC's other major rules enacted during the previous administration, including the non-compete ban and various junk fee regulations, face similar legal challenges and political opposition. The current administration's emphasis on reducing regulatory burdens suggests that comprehensive consumer protection rulemaking may face continued obstacles.