A “click-to-cancel” rule, which would have required businesses to make it easy for consumers to cancel unwanted subscriptions and memberships, has been blocked by a federal appeals court just days before it was set to go into effect.
The Federal Trad Commission's proposed changes, adopted in October, required businesses to obtain a customer's consent before charging for memberships, auto-renewals and programs linked to free trial offers.
The FTC said at the time that businesses must also disclose when free trials or other promotional offers will end and let customers cancel recurring subscriptions as easily as they started them.
The rule was set to go into effect on Monday, but the U.S. Court of Appeals for the Eighth Circuit said this week that the FTC made a procedural error by failing to come up with a preliminary regulatory analysis, which is required for rules whose annual impact on the U.S. economy is more than $100 million.
The FTC claimed that it didn't have to come up with a preliminary regulatory analysis because it initially determined that the rule's impact on the national economy would be less than $100 million. An administrative law judge decided that the economic impact would be more than the $100 million threshold.
The court decided to vacate the rule.
“While we certainly do not endorse the use of unfair and deceptive practices in negative option marketing, the procedural deficiencies of the Commission's rulemaking process are fatal here,” the court wrote.
The FTC declined to comment on Wednesday.
