The FTC rule affects a broad range of businesses, from monthly wine clubs to magazine subscriptions and internet and cable television providers. Sometimes subscription charges end up recurring on consumers' credit and/or debit cards.

The FTC rule also will prohibit sellers from misrepresenting any material facts while using negative option marketing, and imposes civil penalties for consumer recovery. It also will require sellers to obtain consumers’ informed consent to the negative option features of a program before it can charge them.

A consumer advocate organization backed the FTC’s move. “At its core, the Click to Cancel rule ensures that consumers have control over their subscriptions rather than being manipulated and tricked into paying for something they no longer want,” Consumer Federation of America Director said in a release Wednesday. 

The rule also marks the first time the commission has sought civil penalties for deception claims, Holland & Knight noted in an analysis earlier this year of the proposed rule.

The FTC rule follows a similar California law, enacted in September. The effort comes as part of the Biden administration’s wider campaign against “junk fees,” which the president has said would save Americans more than $20 billion annually.  

The final rule has several changes from the proposal 18 months ago. It no longer requires sellers to give customers annual reminders of the negative option aspect of their subscription. The rule also no longer bars sellers from telling consumers wanting to cancel their subscription about plan modifications or reasons to keep their existing agreement without first asking if they want to hear these.

The chamber called the rule “the latest power grab by the Commission in its pursuit to micromanage business decisions.”

“Not only will this rule deter businesses from providing sensible, consumer-friendly subscriptions, but it will leave Americans with fewer options, higher prices, and more headaches,” Neil Bradley, the chamber’s executive vice president and chief policy officer, said in the statement.

In her dissent, Holyoak accused the chair of supporting the rule’s passage immediately before the U.S. presidential election, saying Khan was “hurrying to finish a rule that follows through on a campaign pledge made by the Chair’s favored presidential candidate.”

She also said the agency’s staff — and taxpayers’ funds — would likely be mired in litigation over the rule as companies challenge it.

The FTC issued a business advisory accompanying the final rule with several guidelines for companies that engage in such marketing:

Most of the new provisions take effect in 180 days, or mid-2025, after the rule is published.

By Justin Bachman on Oct 16, 2024
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