FTC plans hearing on proposed ‘click to cancel’ subscription rule

The Federal Trade Commission (FTC) will hold a virtual, live-streamed hearing on January 16, 2024, during which six trade groups and other nongovernmental organizations will be invited to explain their opposition to the commission’s proposed “click to cancel” subscription provision.

In March 2023 the FTC proposed several significant updates to its rules regarding subscriptions and recurring payments, including a “click to cancel” provision that would require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up.

The FTC received over 1,100 comments during the public comment period on the proposed amendments, many of them from trade groups and other organizations expressing concerns that the restrictions would stifle the ability of subscription-based businesses to operate sustainably.

Six of those groups requested to present their positions at an informal hearing, and are now being invited to do so. They include the International Franchise Association, TechFreedom, the Performance Driven Marketing Institute, NCTA – The Internet & Television Association, FrontDoor, and the Interactive Advertising Bureau (IAB).

The click-to-cancel provision — along with other proposals — are “aimed at rescuing consumers from seemingly never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships,” the FTC said this week.

Public comments highlighted consumer frustrations

Responses to the proposal during the public comment period told a clear story: Consumers are frustrated by the subscription practices employed by many companies and would support any changes that give them greater control over how and when they’re charged.

Many consumers described it as a necessary step towards increased consumer protection and prevention of deceptive business practices. They argued that companies should be held accountable for their actions and that consumers should have the right to cancel services easily and without penalty. Commenters called for increased accountability from companies and argued that many of the retention tactics being employed are unethical and unfair.

Research conducted by Toolkits in October unearthed similar findings: A study of 1,007 U.S. consumers who have subscribed to digital publications found that 77% would support a law mandating “one-click cancelation” mechanisms.

Companies and trade groups called for hearings and stakeholder input

Comments submitted by some trade organizations and companies requested hearings and opportunities for industry stakeholders to present their perspectives on the proposed rule. Further discussion and input from industry stakeholders would help mitigate the impact on businesses that rely on subscription revenues, they argued.

Comments submitted by digital publishing trade group Digital Content Next supported addressing deceptive and unfair practices but recommended avoiding overcomplication, excessive notifications, and uneven liabilities. They emphasized the need for clear and easy access to cancellation options and uniform rules to promote clarity for both consumers and businesses.

The IAB expressed concerns about the proposed rule changes, stating they could impose unnecessary burdens on companies that have worked for years to provide “inventive, convenient subscription offers that improve consumers’ lives”. The advertising trade body argued that the requirements will have a significant impact on the digital media industry, and will be costly and time-consuming to implement. It urged the Commission to consider a delayed implementation date of at least 12 months following the finalization of the new rule.

Click to cancel may be unavoidable

The FTC has been attempting to require click-to-cancel mechanisms for years but, by its admission “has only gotten part way to fixing the problem” of sellers making it “hard or impossible” to cancel subscriptions.

As a result, some legal experts say adoption of the proposed updates now appears inevitable and that they expect the rules to go into effect regardless of objections and informal hearings. “We can expect that serious revisions to sellers’ terms and conditions and modifications to purchase processes will be unavoidable in the near future to obtain compliance,” according to Renée Appel, an attorney specializing in marketing and regulatory compliance at law firm Seyfarth Shaw.

Regulatory pressure on subscription cancelation processes is mounting outside of the U.S. as well. In France, a new decree has entered into force requiring that businesses allow consumers to cancel subscriptions and contracts online in three clicks or fewer. In the U.K., the Digital Markets, Competition and Consumers Bill is seeking to reform local laws to further protect consumers from practices including “subscription traps.”

The hearing

Oral statements from the six organizations presenting at the event will be limited to 10 minutes each, the FTC said. These organizations may also request to submit written documents to the FTC within 14 days of publication of the notice in the Federal Register.

The informal hearing will be conducted virtually, starting at 10 a.m. ET, and Securities and Exchange Commission Administrative Law Judge Carol Fox Foelak has been appointed to preside over the event. The link to the hearing webcast will be posted shortly before the date of the event on the FTC’s website.