On October 16, 2024, the Federal Trade Commission (FTC or the Commission) issued the Negative Option Rule — colloquially referred to as the click-to-cancel rule — as part of its ongoing efforts to curb “unfair or deceptive practices related to subscriptions, memberships and other recurring-payment programs in an increasingly digital economy.”FTC, Press Release: Federal Trade Commission Announces Final “Click-to-Cancel” Rule Making It Easier for Consumers to End Recurring Subscriptions and Memberships (October 16, 2024), https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring. The Rule (i) significantly expands the FTC’s preexisting marketing, disclosure, consent, and cancellation requirements; (ii) encompasses a broader definition of negative options programs; and (iii) covers business-to-business (B2B) transactions in addition to business-to-consumer (B2C) transactions.FTC Negative Option Rule, 89 Fed. Reg. 90537 (Nov. 15, 2024) (codified at 16 C.F.R. § 425). For a more in-depth discussion of the Rule and its requirements, see this Client Alert.
The Rule received strong initial pushback both in federal court and within the agency itself. In particular:
First, on January 17, 2025, the Eighth Circuit denied the challengers’ motion to stay the Rule from taking effect pending litigation.Custom Communications, Inc. v. FTC, No. 24-3137 (8th Cir. Jan. 17, 2025) (order denying motion to stay the final rule). . This denial means that, for now, the Rule’s implementation dates are unaffected by the pending litigation.
Second, on March 17, 2025, the FTC filed its brief in the Eighth Circuit consolidated litigation, setting out a vigorous defense of the Rule.See generally Brief of Respondent, Custom Communications, Inc. v. FTC, No. 24-3137 (8th Cir. filed Mar. 17, 2025). This ended speculation that the Republican-led FTC might abandon the Rule. Indeed, several of the defenses raised in the FTC’s brief conflict, at least facially, with arguments that Commissioner Holyoak raised in her initial dissent to the Rule.
In its briefing, the FTC argued that the Rule complies with its Section 18 authority under the FTC Act, which authorizes the Commission to “define with specificity” unfair or deceptive practices “in or affecting commerce.”Brief of Respondent at 19, Custom Communications, Inc. v. FTC, No. 24-3137 (8th Cir. filed Mar. 17, 2025). Here, the FTC states the specificity requirement is satisfied as specific practices related to negative option features were defined, such as material misrepresentations, enrollment without consent, and unreasonable barriers to cancellation.Id. at 19, 27. The FTC also asserted that the Rule’s cross-industry scope is consistent with its statutory authority and that Congress did not impose a single-industry limitation against rules affecting multiple industries.Id. at 19-20.
In addition, the FTC stated that the Rule rests on “copious evidence—including dozens of enforcement actions, tens of thousands of consumer complaints, comments of industry and consumer groups, and economic studies—showing that unfair and deceptive negative option practices are prevalent,” easily passing muster under the arbitrary-and-capricious standard, especially given that the FTC Act does not require “prevalence” to meet a numerical threshold.Id. at 21. Finally, the FTC rejected any arguments that it failed to comply with procedural requirements to conduct a preliminary regulatory analysis, and that any errors resulted in no prejudice to the petitioners’ opportunity to present evidence and engage in the rulemaking process.Id. at 22.
As of April 4, 2025, merits briefing is complete. The matter has not been scheduled for oral argument.
Third, against the backdrop of this Rule litigation, the FTC has continued to bring major negative option enforcement actions — demonstrating its resolve to regulate this space. For example, on April 21, 2025, the FTC announced a complaint against Uber Technologies/USA in the Northern District of California for allegedly violating negative option requirements embedded in the Restore Online Shoppers’ Confidence Act (ROSCA) by charging consumers for Uber One subscription services absent their consent and failing to provide a simple cancellation mechanism despite “cancel anytime” representations.FTC, Press Release: FTC Takes Action Against Uber for Deceptive Billing and Cancellation Practices (Apr. 21, 2025), https://www.ftc.gov/news-events/news/press-releases/2025/04/ftc-takes-action-against-uber-deceptive-billing-cancellation-practices. In touting the merits of that lawsuit, FTC Chair Ferguson clearly laid down his agenda: “Americans are tired of getting signed up for unwanted subscriptions that seem impossible to cancel. The Trump-Vance FTC is fighting back on behalf of the American people.”Id.
In short, the Commission’s posture in the Eighth Circuit litigation and continued enforcement of existing negative option requirements appears to signal, at a minimum, that automatically renewing subscription offers will be scrutinized for compliance under the Rule.
Barring the potential for some unanticipated intervention, the Rule will go into full effect on May 14, 2025.
In preparing for operational compliance with the Rule, companies should also note that state automatic renewal laws may be more stringent or contain additional requirements (e.g., after-sale notifications). Therefore, companies may wish to adopt lowest-common-denominator compliance practices that consider both state laws and the FTC’s Negative Option Rule to better ensure compliance with both state and federal laws. This is particularly important given that certain states expressly provide a private right of action in the event of violations, and not all states have a so-called “good-faith exemption.” Latham lawyers are positioned to advise on such federal and state law compliance efforts.
The authors would like to thank Grant Huebner for his contribution to this Client Alert.