On July 8, 2025, the United States Court of Appeals for the Eighth Circuit vacated the Federal Trade Commission’s (“FTC”) Click-to-Cancel Rule, resolving the challenges to the rule filed on the heels of its adoption in October 2024.
What Is the Click-to-Cancel Rule?
The Click-to-Cancel Rule threatened to have a sweeping effect on businesses across the United States because it applied to all negative option marketing, auto-renewal plans, and free trial offers in both business-to-business and business-to-consumer settings. It would have required businesses to:
- disclose a long list of material terms adjacent to the spot where the customer would consent to the terms before payment information was collected;
- retain proof of consumer consent to the terms; and
- provide a simple method of cancellation.
How Did the Case Get to the Eighth Circuit?
Almost immediately after the FTC voted to adopt the rule in October 2024, multiple parties filed lawsuits challenging its validity in various district courts. Those challenges were consolidated before the Eighth Circuit. Although the Eighth Circuit refused to stay the rule’s effective date of January 15, 2025, the FTC itself announced that it would delay enforcement of the rule until July 14, 2025, while the case played out. Notably, the composition of the FTC changed substantially after the vote to adopt the rule. Following President Trump’s taking office, the three Democratic commissioners who voted in favor of the rule have left the FTC. Commissioners Ferguson and Holyoak — who voted against the rule — remain on the FTC, with President Trump having appointed Commissioner Ferguson as chair.
How Did the Eighth Circuit Rule?
The challengers to the rule raised three arguments as to why the rule should be vacated. The first was that the FTC exceeded its rulemaking authority by promulgating an overly broad “one-size-fits-all” rule. The second was that the FTC did not follow its own internal rulemaking procedures because it failed to prepare the required preliminary analysis before finalizing the rule. Finally, the challengers argued that the rule was arbitrary and capricious and violated the Administrative Procedures Act. Ultimately, the Eighth Circuit addressed only the second argument, and that argument carried the day.
The FTC admitted that it did not prepare the preliminary analysis, but it claimed it did not have to because it initially estimated that the rule would have too small an economic impact for such an analysis to be required. The problem for the FTC, however, was that an administrative law judge had found that the FTC’s estimation was wrong, and that the rule would have a very substantial economic impact, thus triggering the requirement for a preliminary analysis. The FTC, however, opted not to do that analysis, and instead forged ahead with finalizing the rule against its own procedural requirements. The FTC’s decision to skip this procedural step prejudiced the challengers. As a result, the Eighth Circuit vacated the rule.
What’s Next?
The FTC has the option to appeal the Eighth Circuit’s decision to the Supreme Court of the United States, but for the present, the rule is a dead letter. It is vacated and will have no force or effect. Still, there are some state legislatures stepping in to fill the gap, with California having enacted its own version of a click-to-cancel rule applicable to B2C transactions, and New York poised to do the same.
