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The Federal Trade Commission (FTC, Agency) announced a proposed order requiring Chegg Inc. to pay $7.5 million and to maintain a simple, easy-to-use cancellation mechanism for its auto-renewing subscriptions. The FTC’s complaint alleged violations of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA) based on obstructive cancellation flows, continued billing after cancellation requests, and failure to honor consumers’ attempts to stop recurring charges. It follows a 2022 FTC settlement concerning Chegg’s data security practices and underscores the Agency’s ongoing scrutiny of negative option marketing and so-called “dark patterns” in subscription journeys.
FTC’s Allegations
According to the complaint, Chegg made cancellation of automatic renewals difficult and, in some cases, nearly impossible for subscribers to complete. The FTC contends that cancellation links were buried on Chegg’s websites, required multiple clicks to locate, and led to confusing, multi-step processes. Even more significantly, the agency alleges that Chegg continued charging some consumers after they had requested cancellation, and that since October 2020 nearly 200,000 consumers were billed post-request. The complaint further asserts that Chegg received extensive consumer feedback about these issues and internally recognized friction in the cancellation flow but failed to improve the visibility of the cancellation link or streamline the process.
The Commission voted 3-0 to authorize filing the complaint and stipulated order in the U.S. District Court for the Northern District of California. The proposed order directs Chegg to pay $7.5 million for consumer refunds and requires the company to maintain simple cancellation mechanisms for any negative option features going forward.
Legal Significance
The FTC alleges that Chegg’s practices were deceptive under Section 5 of the FTC Act and violated ROSCA, which governs online sales using negative option features. ROSCA requires online sellers to clearly and conspicuously disclose all material terms, obtain a consumer’s express, informed consent before charging, and provide a simple mechanism to stop recurring charges. The Chegg action is a direct signal that the “simple cancellation” requirement will be enforced not just as a matter of policy rhetoric but with monetary relief and injunctive provisions. It also aligns with the FTC’s broader work on negative option marketing and dark patterns, including recent rulemaking and enforcement emphasizing parity between the ease of sign-up and the ease of cancellation.
Although this case arises under federal law, state automatic renewal laws add further obligations that often go beyond ROSCA. Jurisdictions such as California, New York, Colorado, and others impose requirements like pre-renewal reminders, clear acknowledgments of material terms, and a direct, online path to cancel that is at least as easy as the sign-up process. Companies operating nationally must calibrate their practices to satisfy overlapping federal and state regimes, recognizing that the most stringent state requirements can, as a practical matter, set the compliance baseline.
Key Terms of the Proposed Order
The proposed order contains two central components. First, it requires the payment of $7.5 million to be used for consumer refunds tied to the alleged deceptive cancellation practices. Second, it mandates that Chegg maintain simple cancellation mechanisms for negative option features. In practice, this means Chegg must ensure consumers can find and complete cancellation through clear, straightforward paths, and that any post-cancellation billing stops promptly. While the order text provides the specifics, the thrust is to eliminate friction and confusion in the cancellation flow, prevent detours that delay or deter cancellation, and establish operational controls that honor cancellations without further charges.
Practical Implications for Subscription Businesses
For companies offering auto-renewing subscriptions or add-ons, whether in EdTech, SaaS, media, or consumer apps, the Chegg action is a reminder that cancellation UX is a compliance control, not merely a revenue tactic. The FTC’s view of “simple cancellation” is functional and consumer-centric: the path must be obvious, efficient, and effective in ending charges. That affects product design (e.g., location and labeling of the “Cancel” function), engineering (e.g., account and billing state changes executing reliably and promptly), and customer support (e.g., honoring cancellations and avoiding mandatory live-agent steps).
Equally important is evidence. The FTC routinely examines what consumers actually saw, what they clicked, how many steps were required, and whether the path worked across web, mobile web, and in-app environments. Businesses should expect scrutiny of whether cancellation is at least as easy as sign-up, whether optional save /offers are truly optional and not obstructive, and whether billing ceases immediately upon cancellation. If a company uses third-party platforms, app stores, or CX vendors, it should ensure the contractual and technical ability to deliver compliant flows and to retain records that validate consent and cancellation events.
State automatic renewal laws compound these expectations by adding timing and content obligations for disclosures and renewal reminders, and in some cases mandating an online cancellation method that can be completed without logging into a separate account or contacting support by phone or chat. Companies that rely on annual plans, free trials, or promotional rates should be especially careful to provide clear, conspicuous notices and give consumers meaningful opportunities to cancel before the next charge.
Recommended Actions
Businesses can reduce risk quickly by treating cancellation as a lifecycle process that starts at sign-up and continues through renewal, upgrade, and termination. In practice, that means reviewing the entire subscription journey holistically, from the disclosures that precede consent to the mechanisms that implement cancellation and confirm the result.
- Conduct a UX and legal audit of every subscription and cancellation flow across web, mobile web, and in-app environments, with special attention to the visibility, labeling, and number of steps required to cancel.
- Align disclosures and consent capture with ROSCA and state automatic renewal laws, ensuring clear, conspicuous presentation of pricing, cadence, trial terms, renewal timing, and how to cancel; preserve audit-ready records of consent.
- Implement cancellation mechanisms that can be completed in a single session online, provide on-screen and email confirmations with the effective date, and trigger immediate cessation of recurring charges.
- Establish remediation protocols for any post-cancellation charges, including prompt refunds and root-cause analysis to prevent recurrence; monitor complaints, chargebacks, and failure rates for cancellation attempts.
- Train product, growth, engineering, and support teams on legal requirements and escalation pathways, and set KPIs such as time-to-cancel, cancellation success rate, and post-cancellation billing rate, with periodic testing and audits.
Conclusion
The FTC has emphasized that obstructive cancellation flows harm consumers and violate federal law. With this settlement, the agency is reinforcing that position with monetary relief and injunctive obligations aimed squarely at cancellation friction and post-cancellation billing. Expect continued scrutiny of negative option programs, including parity between sign-up and cancellation, online availability of cancellation where sign-up occurs online, and effective honoring of cancellation requests. Companies should assume that cancellation UX will remain an enforcement priority and should invest in robust testing, logging, and vendor oversight to maintain compliance.
Given a patchwork of applicable marketing laws, companies need to work with trusted legal advisors to carefully determine compliant practices that are also viable from a business perspective, especially 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.
To schedule a compliance audit or learn more about how autorenewal rules affect your business, please contact:
Susan Duarte – sfd@commlawgroup.com
Diana James – daj@commlawgroup.com