On Tuesday, July 8, the Eighth Circuit struck down the Federal Trade Commission’s new “click-to-cancel” rule just days before the FTC planned to begin enforcement on July 14, 2025. In the unanimous decision, the Eighth Circuit held that the FTC failed to follow proper procedures once an administrative law judge determined that the cost of implementation on the annual economy would exceed $100 million. The court held that the FTC erred by going ahead with the planned amendment without conducting a preliminary regulatory analysis of the proposed rule change as required under § 22 of the FTC Act.
The court stated that, while it “certainly [does] not endorse the use of unfair and deceptive practices in negative option marketing, the procedural deficiencies of the Commission’s rulemaking process are fatal here.” And, although the rule contains a severability provision, the court held that vacatur of the entire rule is appropriate because of the prejudice suffered by petitioners as a result of the procedural error.
The FTC’s new Negative Option Rule was intended to curb deceptive subscription practices by requiring, among other things, that businesses obtain express affirmative consent from consumers and provide simple cancelation methods. In anticipation of the rule, businesses offering subscriptions have modified their practices to ensure compliance.
While the rule will not go into effect next Monday, the FTC will continue regulating how subscriptions are offered and penalizing businesses that engage in unfair practices. Therefore, companies should continue to provide clear disclosures of automatic recurrent agreements and make it straightforward to cancel.
This decision also comes in the wake of California’s updated automatic renewal law, which took effect on July 1, 2025. California’s law is one example of states’ increasing focus on the subscription space. As another example, a new rule in Massachusetts coming into effect on September 2, 2025, is modeled on the FTC’s junk fees and click-to-cancel rules. Businesses offering subscriptions should continue to assess their processes to confirm they comply with existing and upcoming laws and regulations.
