The Federal Trade Commission’s (FTC) negative option rule, better known as the “Click-to-Cancel” rule, which was set to go into effect July 14, 2025, has been vacated in its entirely by the Eighth Circuit in Custom Communications, Inc. v. FTC, Case No. 24-3137 (8th Cir. July 8, 2025). The court held that the FTC flouted Section 22 of the FTC Act by skipping a preliminary regulatory analysis after learning the rule would impose more than $100 million in annual costs. Because the FTC’s procedural misstep was prejudicial, the court applied 15 U.S.C. § 15a(e)(3) and APA § 706(2)(D) to “set aside the rule.”
On June 27, 2025, just 11 days earlier, the Supreme Court sharply restricted federal district courts’ ability to issue nationwide, i.e., universal, injunctions, holding that such relief “likely exceeds” the equitable powers conferred by the Judiciary Act of 1789. Trump v. Casa, Inc. (Case No. 24A885, June 27, 2025). That decision will not impact the Eighth Circuit’s ruling to vacate the Negative Option Rule nationwide, given the scope of Section 18(e)(3) of the FTC Act, which directs a reviewing court to “set aside the rule.”
Notably, approximately 30 jurisdictions, including California, Colorado, and New York, impose requirements that look like the now vacated federal rule, meaning that businesses in these states are not off the hook. Further, the pre-1973 mail/telephone negative option rule remains in place, and the FTC can still challenge unfair or deceptive negative-option practices on a case-by-case basis, but not under a Chevron-free standard, thanks to Loper Bright. What has been set aside is the 2024 overhaul codified at 16 C.F.R. Part 425. However, note that the FTC may file a petition for rehearing within 21 days of the judgment.
Takeaways
- The 2024 Negative Option Rule is gone, at least for now. While businesses can treat the 2024 federal rule as vacated, they should retain documentation of cancellation flows. The FTC still has § five authority, and plaintiffs’ lawyers will reference the vacated rule as a benchmark for “reasonable” practices.
- Section 5 of the FTC Act still applies, meaning the FTC can continue to bring enforcement cases alleging that specific negative‑option practices are unfair or deceptive.
- The 1973 Rule remains and governs pre-notification plans for goods shipped through the mail or by telephone order. It was never repealed and is back in force because the 2024 amendments that would have replaced it have been vacated.
- States with automatic-renewal statutes are unaffected as they already impose cancellation‑ease and notice requirements that are as strict, or stricter, than the vacated federal rule. As such, businesses in those states should map their cancellation procedures against California Bus. & Prof. Code § 17600 et seq., New York GBL § 527, Colorado § 6‑6‑1201, etc., as those statutes largely mirror “Click‑to‑Cancel.”
- For businesses that already built contract language around the 2024 rule’s mandated disclosures or cancellation links, they may (i) keep the language for consumer‑friendliness, or (ii) move it to a business‑practice addendum so it can be adjusted quickly if the FTC re‑proposes the rule or if the Eighth Circuit decision is overturned.
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