I had a thought-provoking conversation this week with an in-house counsel about the now-vacated FTC “Click to Cancel” rule—a regulation that was set to take effect July 14 and could have reshaped how companies manage subscription cancellations online.
🚨 Why It Matters
While the rule was framed as a win for consumers, its real impact would have been felt by companies—especially those whose business models rely on recurring revenue. The regulation would have required businesses to make cancellation as frictionless as sign-up, potentially increasing churn and reducing customer lifetime value.
If your company depends on subscriptions, this rule was more than a compliance issue—it was a strategic risk.
⚖️ What the Court Said
On July 8, the U.S. Court of Appeals for the Eighth Circuit vacated the rule, citing a procedural misstep by the FTC. Specifically, the agency failed to provide a preliminary regulatory analysis, which is required when projected compliance costs exceed $100 million. Without that analysis, the court ruled that businesses were denied meaningful input during the rulemaking process.
Former FTC Chair Lina Khan defended the agency’s process, but the court’s decision stands—for now.
🔍 What’s Next
The FTC has three options:
- Appeal the decision to the Supreme Court.
- Restart the rulemaking process with the required analysis and public comment period.
- Walk away, though that seems unlikely given the agency’s recent focus on consumer protection in digital markets.
Meanwhile, state-level automatic renewal laws (ARLs)—especially in California and New York—continue to impose similar requirements. And the FTC still has enforcement authority under existing statutes like the Restore Online Shoppers’ Confidence Act.
💡 Executive Takeaway
Even though the Click to Cancel rule is paused, the trend toward greater transparency and consumer control is not. Companies should:
- Audit their cancellation flows for friction points.
- Stay aligned with state ARLs and evolving federal guidance.
- View compliance as a customer experience opportunity, not just a legal obligation.
This isn’t just about avoiding penalties—it’s about staying ahead of consumer expectations and regulatory momentum.
[View source.]
