By Chase Boss, Junior Editor
Have you ever been charged for an annual subscription you did not realize was still active? The problem seems so common today that services now specialize in providing consumers with a list of their recurring subscriptions, should they want to cancel them.[1] These private remedies, however, are simply reactive.
On October 16, 2024, the FTC took a proactive step to protect American consumers from difficult-to-cancel subscriptions through its “Click-to-Cancel” rule.[2] The basic premise is simple: canceling a subscription must be as easy as signing up for one.[3]
This initiative was part of the FTC’s efforts to update its 1973 Negative Option Rule, creating new regulations in the face of rising online subscriptions and recurring billing.[4] The new rule is expected to have a broader impact than earlier regulations, touching industries from fitness centers to streaming services and subscription boxes.[5]
The rule has drawn attention beyond regulatory circles.[6] In fact, since its original introduction in March 2023, the rule garnered nearly 16,000 comments from consumer and industry stakeholders alike.[7] On average, that’s about seventy complaints per day from consumers frustrated by subscription traps and difficult cancellations.[8]
The rule went into effect mid-January 2025, and businesses have until May 14 to achieve full compliance.[9] However, both legal challenges and political action could delay or nullify enforcement prior to the May 14 compliance date.[10]
1973 Negative Option Rule and Latest Protections
Negative option marketing requires consumers to take some action to cancel a subscription to avoid continued charges.[11] The first version of the FTC’s Negative Option Rule was created to combat negative option marketing among prenotification plan sellers.[12] That is, sellers who sent periodic notices offering goods to consumers, and then sent and charged those goods if the consumer did not respond and actively decline the offer.[13]
While early electronic systems in the 1970s made the transfer of information and funds within sellers’ organizations easier,[14] the commercial use of the internet in the 1990s called for an expanded scope of the negative option rule.[15]
The Restore Online Shoppers’ Confidence Act (ROSCA)[16] and the Telemarketing Sales Rule (TSR)[17] introduced stronger protections for phone and online-based subscriptions.[18] ROSCA’s passage in 2010 mandated clear disclosures, easy cancellation methods, and informed consent.[19]
ROSCA enforcement has resulted in high-profile cases, exposing deceptive practices in “free trial” scams involving companies such as Amazon and MoviePass.[20] Such practices involve “trick-and-trap” tactics through disguised advertisements and a lack of clear, upfront terms.[21]
The original rule and subsequent laws and regulations reflect the FTC’s continuous expansion of its regulatory efforts that try to create clearer consumer protections.[22] While mail-order book clubs were once a focus, deceptive marketing strategies contemplated by the FTC have evolved and expanded.[23]
The Road to Amendment
According to the FTC, today’s negative option marketing has been associated with misrepresentation of material facts in the marketing of services, failing to clearly disclose terms before billing, charging consumers without informed consent, and making cancellation unnecessarily complex.[24] An updated rule was needed to broaden applicability and to provide comprehensive coverage of all recurring billing practices.[25] Further, small businesses that are burdened by large firms’ deceptive subscription practices may enjoy a leveled playing field in terms of marketing.[26]
Critics opposing the updated Click-to-Cancel Rule argue that the 1973 Negative Option Rule, ROSCA, and TSR already offer sufficient consumer safeguards and that a new rule is unnecessary and duplicative of existing protections.[27]Moreover, several states have enhanced automatic renewal laws; critics suggest that parallel state regulations in this space may just complicate rather than streamline compliance.[28] Businesses may also experience additional operational costs, including contract updates and staff training.[29]
The FTC eventually approved the rule in a 3-2 vote. Commissioner Rebecca Kelly Slaughter issued a supporting statement,[30] and Commissioner Melissa Holyoak issued a dissent.[31] The vote itself highlights a clear political divide present within the agency.[32]
Some business groups contend that the updated rule oversteps FTC authority, with the Chamber of Commerce calling the rule a “power grab.”[33] Critics have challenged the new rule in federal court. Four lawsuits from the U.S. Chamber of Commerce and trade groups have been consolidated in the Eighth Circuit.[34] Among their arguments was the FTC’s lack of rulemaking authority,[35] and flawed administrative process.[36] The FTC’s legal defense was weakened by the overturning of Chevron, reducing its rulemaking authority.[37] The Circuit has since denied a request to block the rule, allowing it to become fully enforceable by May.[38]
The Updates
The new rule created stricter requirements for disclosing renewal intervals, pricing, cancellation deadlines, and methods of cancellation.[39] The FTC maintains that the updated rule is essential to prevent consumer exploitation.[40]
Application: The rule applies across all transaction methods, such as online, in-person, and telephonic transactions, and covers both business-to-consumer (B2C) and business-to-business (B2B) relationships.[41]
Consent: Consent must now be unambiguous and obtained from the subscriber/buyer separately from other agreements.[42] Businesses must retain proof of consent for at least three years.[43]
Cancellation: Companies must offer a cancellation method that matches the original subscription process, i.e., online cancellations for online subscriptions.[44] Where subscriptions need no human interaction, canceling parties should not be required to interact with a human in order to cancel.[45]
Disclosure of Terms: All material terms must be disclosed prior to billing, including cancellation deadlines and clear guidance on how to cancel.[46] These disclosures must appear next to the method of consent, such as a digital signature line or unchecked box.[47]
Violations of the rule carry civil penalties of just over $50,000 per incident, in addition to consumer refunds and the potential of litigation for non-compliance.[48] Although FTC leadership may lean toward deregulation,[49] the rule is on track to take full effect on May 14, 2025.[50]
[1] See, e.g., Manage Subscriptions, Rocket Money, https://www.rocketmoney.com/feature/manage-subscriptions.
[2] Press Release, Federal Trade Commission, Federal Trade Commission Announces Final “Click-to-Cancel” Rule Making it Easier for Consumers to End Recurring Subscriptions and Memberships (Oct. 16, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring.
[3] Lindsay Sherwood Fouse-Hopkins & Gabriella Godlewski, FTC Finalizes Click-to-Cancel Rule, Clark Hill PLC (Jan. 27, 2025), https://www.clarkhill.com/news-events/news/40635/.
[4] Press Release, supra note 2.
[5] Fouse-Hopkins, supra note 3.
[6] Alina Selyukh, Canceling subscriptions has to be as easy as signing up, the FTC says in a new rule, NPR (Oct. 16, 2024, 1:03 PM), https://www.npr.org/2024/10/16/nx-s1-5154814/click-to-cancel-subscriptions-memberships-ftc-rule.
[7] Press Release, Federal Trade Commission, Federal Trade Commission Proposes Rule Provision Making it Easier for Consumers to “Click to Cancel” Recurring Subscriptions and Memberships (Mar. 23, 2023), https://www.ftc.gov/news-events/news/press-releases/2023/03/federal-trade-commission-proposes-rule-provision-making-it-easier-consumers-click-cancel-recurring.
[8] Jessica Guynn, Will ‘click to cancel’ get canceled? New FTC rule faces legal, political challenges, USA Today (last updated Jan. 24, 2025, 12:24 PM), https://www.usatoday.com/story/money/2025/01/14/ftc-click-to-cancel-rule-get-canceled/77671809007/.
[9] Fouse-Hopkins, supra note 3.
[10] Camila A. Tapernoux & Carson Martinez, The FTC’s Final “Click-to-Cancel” Rule Faces Legal and Political Hurdles, Morrison Foerster LLP (Jan. 9, 2025), https://www.mofo.com/resources/insights/250109-the-ftc-s-final-click-to-cancel-rule.
[11] Dee Pridgen & Jolina C. Cuarsema, Negative Option and ROSCA; Gift Cards, 11 Consumer Prot. and the L. § 35, Nov. 2024.
[12] Negative Option Rule, 88 Fed. Reg. 24717 (Apr. 24, 2023).
[13] Pamela Church et al., United States: Federal Trade Commission Floats New Rule Making it Easier for Consumers to “Click to Cancel” Subscriptions, Connect on Tech (Apr. 10, 2023), https://connectontech.bakermckenzie.com/united-states-federal-trade-commission-floats-new-rule-making-it-easier-for-consumers-to-click-to-cancel-subscriptions/.
[14] The Evolution of E-Commerce, The U. of Tex. Permian Basin (last visited Apr. 20, 2025), https://online.utpb.edu/about-us/articles/business/%EF%BF%BCthe-evolution-of-e-commerce/ (suggesting that modern e-commerce began with the innovation of electronic funds transfer (EFT) in the early 1970s).
[15] See Yodai Takeuchi, History of e-commerce: The World Wide Web and e-commerce boom, Medium (Dec. 21, 2023), https://yodai.medium.com/history-of-e-commerce-the-world-wide-web-and-e-commerce-boom-9aa14ec31666.
[16] 15 U.S.C. §§ 8401-8405 (2010).
[17] Telemarketing Sales Rule, 16 C.F.R. § 310 (2010).
[18] Samuel D. Boro et al., FTC Finalizes “Click To Cancel” Rule with Substantial Requirements for Recurring Subscription Programs, Perkins Coie (Nov. 6, 2024), https://perkinscoie.com/insights/update/ftc-finalizes-click-cancel-rule-substantial-requirements-recurring-subscription.
[19] Pridgen, supra note 11.
[20] Id.
[21] Selyukh, supra note 6.
[22] Pridgen, supra note 11.
[23] Id.
[24] Press Release, supra note 2.
[25] Boro, supra note 18.
[26] Sara Winegardner, Groups Stand Up for FTC’s Click-to-Cancel Rule, Cablefax (Apr. 2, 2025), https://www.cablefax.com/regulation/peoples-court-groups-stand-up-for-ftcs-click-to-cancel-rule.
[27] Stephanie Joyce, The New Administration Should “Click to Cancel” the FTC’s New Negative Option Rule, Comput. & Commc’n Indus. Ass’n (Feb. 26, 2025), https://ccianet.org/articles/the-new-administration-should-click-to-cancel-the-ftcs-new-negative-option-rule/.
[28] Samuel Adams & Daniel Fortune, FTC’S “Click to Cancel” Rule to Simplify Subscription Cancellations Becomes Effective, JD Supra (Jan. 14, 2025), https://www.jdsupra.com/legalnews/ftc-s-click-to-cancel-rule-to-simplify-5989005/.
[29] Wendy Davis, Court Rejects Request By IAB, Others: Won’t Block Click-To-Cancel, MediaDailyNews (Jan. 20, 2025), https://www.mediapost.com/publications/article/402697/court-rejects-request-by-iab-others-wont-block.html?jid=166534&sid=9879764.
[30] Public Statement, Statement of Comm’r Rebecca Kelly Slaughter Regarding the Final Trade Regulation Rule Concerning Recurring Subscriptions and Other Negative Option Programs (Oct. 16, 2024), https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/statement-commissioner-rebecca-kelly-slaughter-regarding-final-trade-regulation-rule-concerning.
[31] Public Statement, Dissenting Statement of Comm’r Melissa Holyoak re Negative Option Rule (Oct. 16, 2024), https://www.ftc.gov/legal-library/browse/cases-proceedings/public-statements/dissenting-statement-commissioner-melissa-holyoak-re-negative-option-rule.
[32] Guynn, supra note 8.
[33] Selyukh, supra note 6.
[34] Custom Commc’n, Inc. v. FTC, Case No. 24-3137 (8th Cir. 2024); See Tapernoux, supra note 10.
[35] Tapernoux, supra note 10.
[36] Joyce, supra note 27.
[37] See Loper Bright Enter. v. Raimondo, 603 U.S. 369 (2024).
[38] Davis, supra note 28.
[39] Boro, supra note 18.
[40] Guynn, supra note 8.
[41] Adams, supra note 28.
[42] Boro, supra note 18.
[43] Fouse-Hopkins, supra note 3.
[44] Boro, supra note 18.
[45] Fouse-Hopkins, supra note 3.
[46] Id.
[47] Id.
[48] Boro, supra note 18; see also Adams, supra note 28.
[49] Guynn, supra note 8.
[50] Daniel J. Fortune, FTC’s “Click to Cancel” Rule to Simplify Subscription Cancellations Becomes Effective, 15 Nat’l L. Rev., No. 110 (Jan. 13, 2025), https://natlawreview.com/article/ftcs-click-cancel-rule-simplify-subscription-cancellations-becomes-effective#google_vignette.