Today, the Federal Trade Commission (FTC) announced the effective date for its “Click to Cancel” Final Rule (“Rule”). The Rule will become effective on January 14, 2025, and businesses will have until May 14, 2025, to comply with the following requirements of the new Rule to:
- clearly and conspicuously disclose material terms before obtaining a consumer’s billing information in connection with a negative option feature;
- obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and
- provide a simple mechanism to cancel the negative option feature and immediately halt charges after the cancellation.
Ongoing Legal Challenges
At least three lawsuits have been filed across the U.S. challenging the Rule, arguing it is “arbitrary, capricious, and an abuse of discretion” under the Administrative Procedure Act and lacks specificity in defining unfair or deceptive practices.
Dissent
The FTC passed the Rule on a 3-2 vote across political lines, with Commissioner Holyoak issuing a detailed dissent. She argues that the rulemaking process did not adhere to Section 18 of the FTC Act because the Final Rule:
- extends beyond the “area of inquiry” proposed by the advance notice of proposed rulemaking;
- lacks specific definitions of acts or practices that are unfair or deceptive; and
- fails to prove that practices related to negative option billing are prevalent.
In addition to suggesting court challenge strategies, this dissent highlights a potential shift in regulatory approach with the new administration and FTC leadership.
The New Administration
The new presidential administration will likely change the FTC’s leadership and regulatory approach. The Rule will likely be one of the first targets for possible reversal by Congress or the newly composed FTC.
On November 7, Senator Ted Cruz (Sen.-R-TX), the ranking member of the Senate Commerce, Science, and Transportation Committee, addressed a letter to FTC Chairwoman Lina Khan, urging the FTC to “immediately stop all work on outstanding rules, regulations and guidance” and “focus only on matters at that are uncontroversial and would be approved unanimously by all members.” According to Sen. Cruz, “[a]ny controversial FTC action taken up or continued after November 5th will receive particular scrutiny.”
Conclusion
The Rule’s future is uncertain, and it may be stayed or overturned before the May 14, 2025, compliance deadline. For now, we recommend businesses prepare for the possibility of the Rule becoming effective and consider other laws that already impose similar requirements, such as the Restore Online Shoppers Confidence Act (ROSCA), the Telemarketing Sales Rule (TSR), and state autorenewal laws.
Given the Rule’s somewhat vague requirements and a patchwork of other applicable marketing laws, companies need to collaborate with trusted legal advisors to carefully determine compliant practices that are also viable from a business perspective. This is especially true given that changes related to user interfaces, consent tracking, and administrative procedures will require testing and time to implement effectively.
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
Jonathan S. Marashlian – Tel: 703-714-1313 / E-mail: jsm@CommLawGroup.com
Diana James – Tel: 703-663-6757 / E-mail: daj@CommLawGroup.com
