Key Takeaways
On July 8, 2025, a three-judge panel of the U.S. Court of Appeals for the Eighth Circuit issued an opinion vacating the Federal Trade Commission’s Negative Option Rule, also known as the “click-to-cancel” rule. The ruling came just days before the July 14, 2025, compliance deadline for the rule.
The court invalidated the rule on procedural grounds. It held that the FTC failed to issue a preliminary regulatory analysis required by Section 22(b)(1) of the FTC Act when any proposed amendment to a trade regulation rule (that is, a rule issued under Section 18 of the FTC Act) is expected to have an annual economic impact of at least $100 million. Although the FTC initially estimated the rule’s impact to be less than $100 million, the Eighth Circuit found it was a prejudicial error for the FTC to not issue a preliminary regulatory analysis once the annual impact was recognized in the rulemaking process to exceed $100 million. The court reasoned that the FTC’s failure deprived parties of the opportunity to address the Commission’s cost-benefit analysis of alternatives. Further, the court found that excusing noncompliance could encourage the Commission to make unrealistically low estimates of the economic impact of proposed rules.
While the July 14 compliance deadline is now off, it does not mean that automatically renewing subscription issues will disappear from the FTC’s radar screen. To be sure, unless the FTC seeks rehearing or appeals the Eighth Circuit’s ruling—which may be unlikely considering now-Chairman Andrew Ferguson and Commissioner Melissa Holyoak’s opposition to the adoption of the rule in November 2024—the rule is a dead letter. While the FTC has the option of relaunching the rulemaking, Chairman Ferguson has said he prefers enforcement over rulemaking. However, even if the rule goes no further than the Eighth Circuit decision, the FTC has at least previously taken the position that the Restore Online Shoppers’ Confidence Act (ROSCA) imposes a number of the requirements included in the now vacated Negative Option Rule and the FTC under current leadership has been actively enforcing ROSCA in existing litigation and newly filed cases.
In addition, the panoply of state laws governing automatically renewing subscriptions continue to apply. Many of these laws impose requirements that are similar to those in the vacated FTC rule, and in some cases exceed them. For example, California’s updated automatic renewal law, which went into effect July 1, 2025, as discussed in our earlier Update, imposes requirements intended to allow consumers to easily cancel subscriptions, and even imposes restrictions on making “save” attempts made to persuade consumers not to cancel their subscriptions—which the FTC had declined to address in its rule. Further, like the vacated FTC rule, some state auto-renewal laws seek to regulate not only business-to-consumer transactions but also business-to-business transactions, such as the recently amended Colorado law, highlighted in our earlier Update.
Thus, the Eighth Circuit ruling is a welcome development for many businesses but only a partial reprieve.
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