FTC Faces Legal Pushback Over Controversial Subscription Cancellation Rule

The Background of the FTC Rule Lawsuit

An industry group representing cable and Internet providers sued alongside two others on Wednesday to block a U.S. Federal Trade Commission rule that requires companies to offer simple cancellation mechanisms for subscriptions. NCTA - The Internet & Television Association and groups representing the home security and online advertising industries said in papers filed with the 5th U.S. Circuit Court of Appeals in New Orleans that the rule known as click to cancel oversteps the FTC's authority and was not supported by evidence.

Key Issues Surrounding the Subscription Cancellation Regulation

A spokesperson for the FTC declined to comment. The FTC finalized the rule on Oct. 16 after considering thousands of comments from individuals, industry groups, and consumer advocates. The Electronic Security Association, Interactive Advertising Bureau, and NCTA had filed comments criticizing the rule as overly broad.

Implications for Consumers and Businesses

• The rule mandates businesses to obtain consumer consent for subscriptions, auto-renewals, and free trials converting to paid memberships.
• Cancellation methods must be as easy to use as the signup process.
• It prohibits requiring consumers who signed up through an app or website to navigate a chatbot or agent for cancellation.

For in-person signups, companies must provide means to cancel via phone or online. The 5th Circuit is a favorable venue for business groups to challenge agency actions due to its composition, with twelve of its seventeen active judges appointed by a Republican president, including six by former President Donald Trump.