On January 17, 2025, the Eighth Circuit Court of Appeals, in a 2-1 decision, denied a request to stay the Federal Trade Commission’s (FTC) Click to Cancel Rule while the litigation is pending. The Rule’s ban on misrepresenting material facts in negative option marketing took effect on January 14, 2025, while its consent and cancellation requirements are set to begin on May 14, 2025. The court’s decision means these dates remain unchanged for now. The case’s briefing is expected to conclude by April, potentially allowing a ruling before the May deadline.
New Administration’s Regulatory Freeze Pending Review
As we discussed in our last advisory, we expected the new administration to take action to potentially address this rule and other agency rules. On January 20, 2025, President Trump issued a “Regulatory Freeze Pending Review” memorandum directing all executive departments and agencies to halt regulatory actions for review and approval by newly appointed leaders. Key provisions include:
- Pause on Rulemaking: No new rules may be proposed or issued without review and approval by a department or agency head appointed by the President unless exempted by the Office of Management and Budget (OMB) Director for emergencies or urgent situations.
- Withdrawal of Unpublished Rules: Any rules sent to the Office of the Federal Register (OFR) but not yet published must be withdrawn for review.
- Delay of Effective Dates: Agencies are instructed to consider postponing the effective date of rules published but not yet in effect by 60 days to review questions of fact, law, and policy. This may include reopening public comment periods or further delaying implementation as needed.
- Action Based on Review: Rules that raise no substantial issues after review require no further action. Rules with substantial issues must be addressed in consultation with the OMB Director.
- Compliance with Existing Executive Orders: Agencies must ensure adherence to all applicable regulatory management orders.
Memorandum’s Impact on the Click to Cancel Rule
The rule’s ban on misrepresentation is already in effect and is unlikely to be impacted. However, the consent and cancellation provisions could face delays.
Steps Businesses Can Take to Prepare:
- Review Marketing Materials: Ensure that marketing materials comply with the misrepresentation ban such that they accurately disclose the: (a) nature, terms, or cancellation process of the negative option; (b) cost, (c) purpose or effectiveness of the product or service, (d) health or safety aspects; or (e) other material facts.
- Implement Consent and Cancellation Requirements: Prepare to implement consent and Click to Cancel mechanisms ahead of the May 14 deadline.
- Monitor developments: Stay updated on court rulings and potential impacts from the regulatory freeze.
The CommLaw Group Can Help!
Given the myriad of federal and state autorenewal requirements, as well as the increased risk of consumer protection enforcement by the FTC and state attorneys general, and even civil litigation, The CommLaw Group has a team standing by ready to answer your questions and help you navigate your business teams through changes to its operations and practices.
CONTACT US NOW, WE ARE STANDING BY TO GUIDE YOUR COMPANY’S COMPLIANCE EFFORTS
Susan Duarte – Tel: 703-714-1318 / E-mail: sfd@commlawgroup.com
Diana James – Tel: 703-663-6757 / Email: daj@CommLawGroup.com