Court cancels FTC click-to-cancel rule on a technicality • The Register

The US was supposed to celebrate the enforcement date for an FTC rule requiring companies to offer simple, clear, one-click subscription cancellations next Monday, but a panel of appeals court judges has decided otherwise.

Writing in a decision [PDF] published yesterday, a unanimous three-judge panel from the Eighth Circuit Court of Appeals vacated the so-called “click to cancel” rule passed last October. The judges noted the rule drew immediate complaints from businesses and industry associations unhappy with the idea they’d be forced to move cancellation buttons out of the digital labyrinths where they’re often hidden. 

The rule, which the Federal Trade Commission passed last year in a 3-2 vote, tackles various tricks that companies use to make it harder to unsubscribe from services, like dark patterns, misrepresentations of the cancellation process, passively transitioning trial accounts to paid subscriptions without notification, and the like.

Such a measure seems easy to support unless you’re a company engaged in such practices. Even the triumvirate of judges making the decision doesn’t really seem to be against the rule – they just don’t like how it was implemented. 

“While we certainly do not endorse the use of unfair and deceptive practices in negative option [the business practice of taking customer silence or inaction for consent] marketing, the procedural deficiencies of the Commission’s rulemaking process are fatal here,” the judges said in their decision. 

Procedural deficiencies are definitely one way to put it. 

A cornerstone of the appeal, and yesterday’s decision, is the fact that the FTC failed to undertake a preliminary regulatory analysis of the proposed rule. That analysis was supposed to be triggered, the court found, after an administrative law judge (ALJ) found that the rule would have at least a $100 million effect on the economy.

In other words, it doesn’t matter whether the actual law itself is any good – it’s gone because the FTC didn’t follow its own rules, in what dissenting FTC Commissioner Melissa Holyoak called a “race to cross the finish line … less than a month from election day.” 

Not that Holyoak would have likely supported it anyway – she stated in her dissent that she also believed the FTC overstepped its legal authority with the passage of the click-to-cancel rule, which she said was overly broad and thus unlikely to survive legal challenge. 

But the judges all agreed that some kind of rule is needed. 

“Many American consumers have found themselves unwittingly enrolled in recurring subscription plans, continuing to pay for unwanted products or services because they neglected to cancel their subscriptions,” the trio said in their decision. “But vacatur of the entire Rule is appropriate in this case because of the prejudice suffered by Petitioners as a result of the Commission’s procedural error.”

We reached out to the FTC to learn what it plans to do following the court’s decision; they had no comment. ®