On July 8, the U.S. Court of Appeals for the Eighth Circuit issued a unanimous opinion in Custom Communications Inc. v. Federal Trade Commission that vacates the Federal Trade Commission’s (FTC) Rule Concerning Recurring Subscriptions and Other Negative Option Programs (Rule), also referred to as the “Click to Cancel” Rule, which requires businesses to provide a simple mechanism for consumers to cancel automatically renewing contracts. Had it taken effect, the Rule would have imposed enhanced requirements on companies that utilize negative option marketing, including express consent, clear disclosures, and streamlined cancellation mechanisms. We summarized the requirements of the Rule here.
The court’s opinion vacated the Rule in its entirety, holding that the FTC failed to comply with procedural requirements under the FTC Act. Specifically, the court found that the FTC was required to prepare and publish a preliminary regulatory analysis once an administrative law judge concluded that the Rule’s expected economic impact exceeded $100 million annually. The FTC declined to do so, despite the administrative law judge’s findings and the statutory mandate.
Implications for Businesses
Unless the ruling is overturned by the Supreme Court of the United States:
- The Rule will not take effect. Effective immediately, the Eighth Circuit’s ruling halts implementation of the Rule and removes the July 14, 2025 compliance deadline previously set by the FTC. Businesses are not required to implement the simplified cancellation procedures, consent protocols, or expanded disclosure obligations set forth in the vacated rule.
- Companies engaged in negative option marketing should continue to comply with other applicable laws. These include the existing FTC Act prohibitions on unfair or deceptive trade practices and any applicable U.S. state consumer protection laws.
We will continue to monitor these proceedings and any potential appeals of the court’s ruling.
The authors wish to thank Bass, Berry & Sims summer associate Nicholas Bovenzi for his contributions to this content.
