WASHINGTON (dpa-AFX) - A U.S. federal appeals court has struck down the Federal Trade Commission's 'click-to-cancel' rule, citing a procedural misstep just days before it was set to take effect.
The regulation, introduced as part of the Biden administration's 'Time is Money' initiative, aimed to make it easier for consumers to cancel recurring subscriptions and memberships such as gym, streaming, or e-commerce services as easily as they were initiated.
The FTC had proposed requiring businesses to clearly disclose when free trials or promotional offers would end, obtain consent before charging customers, and offer a straightforward cancellation option.
However, the Eighth Circuit Court ruled that the agency failed to conduct a necessary preliminary regulatory analysis, a requirement for rules projected to have an economic impact exceeding $100 million annually.
The FTC initially argued the rule would fall below that threshold, but an administrative judge later disagreed. The court said that while the rule addressed problematic business practices, the FTC's failure to follow proper rulemaking procedures rendered it invalid.
The decision drew sharp criticism from consumer advocates, who accused the FTC of delaying enforcement and giving corporate interests time to challenge the rule. The U.S. Chamber of Commerce, which led a legal challenge, praised the outcome, calling the rule a federal overreach.
Meanwhile, the FTC is preparing for a separate trial against Amazon, accusing the tech giant of enrolling users in Prime without clear consent and obstructing cancellations a case that could further test the agency's ability to regulate consumer protections in the digital age.
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