Federal Appeals Court Blocks FTC’s Subscription Cancellation Rule

A federal appeals court has blocked the Federal Trade Commission’s (FTC) proposed “click-to-cancel” rule, which would have mandated businesses to make subscription cancellations as straightforward as signing up.

The rule, set to take effect next week, was overturned following a legal challenge by industry groups.

The rule, introduced by the FTC in October 2024, aimed to simplify cancellation processes for consumers subscribed to services such as gym memberships, streaming platforms, and subscription boxes. It required that cancellation methods be as easy and accessible as the initial signup process, including clear disclosures about free trials and subscription renewals.

However, industry associations—including groups representing cable companies, entertainment studios, and subscription-based businesses—opposed the rule, arguing that it exceeded the FTC’s regulatory authority and imposed substantial burdens on businesses.

The US Court of Appeals for the Eighth Circuit unanimously ruled that the FTC’s rulemaking process contained significant procedural errors. Specifically, the court found that the FTC failed to provide an adequate preliminary regulatory analysis—a requirement for rules expected to impact the economy by over $100 million annually. The FTC had originally argued that such an analysis was unnecessary, initially estimating the rule’s economic impact below this threshold. An administrative judge later contradicted this estimate, determining the economic impact exceeded $100 million, making a preliminary analysis mandatory.

“While we certainly do 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,” the court wrote in its decision.

The ruling also highlighted internal disagreements within the FTC itself. The court referenced dissenting opinions from Republican Commissioners Andrew Ferguson and Melissa Holyoak, who had expressed concerns about the rule’s expedited process and its broad economic implications.

Given the recent shift in the FTC’s leadership to a Republican majority—including Ferguson and Holyoak—the future of the rule appears uncertain. FTC representatives have declined to comment following the ruling.

The court’s decision means the FTC would need to restart the rulemaking process from scratch, delaying the rule’s potential implementation at least until 2026, according to legal experts.

Consumer advocates, who supported the rule as a protection against difficult cancellation processes, expressed disappointment, noting that subscription-related consumer complaints remain high.

With input from the Verge, the Washington Post, and the Associated Press.