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An appeals court has struck down the Federal Trade Commission’s “click-to-cancel” rule requiring businesses to make it as easy for consumers to cancel subscriptions as it was to sign up, citing flaws in the rulemaking process.
The U.S. Court of Appeals for the Eighth Circuit noted that the FTC did not issue a preliminary regulatory analysis of the costs and benefits of the rule, which was set to take effect on July 14. The analysis is a requirement for rules that will have an annual effect on the national economy of $100M or more.
“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’s per curiam opinion read.
“Excusing the commission’s noncompliance with Section 22 [of the FTC Act] could open the door to future manipulation of the rulemaking process,” it added.
The rule was passed under former Democratic Chair Lina Khan as part of a crackdown on deceptive subscription practices. “The FTC’s click-to-cancel rule isn’t going into effect for one reason: the Biden FTC cut corners and didn’t follow the law. Process matters,” said FTC Commissioner Mark Meador.
The Chamber of Commerce and a trade group – representing major media firms including Disney (NYSE:DIS), Paramount (NASDAQ:PARA) and Comcast (NASDAQ:CMCSA) – were among those that sued to block the rule. Other trade groups representing online advertising, insurance, and gyms also pushed back against the rule.