The Eighth Circuit vacated the FTC's "click to cancel" rule, prompting businesses to rethink their subscription and automatic renewal practices. The court ruled that the FTC did not meet procedural requirements during the rulemaking process, marking these deficiencies as crucial. Initially introduced in 1973, the Negative Option Rule was updated by the FTC in several phases, with significant scrutiny on the negative option features. Companies may still need to adhere to certain compliance standards despite the rule's vacating.
The US Court of Appeals for the Eighth Circuit vacated the Federal Trade Commission's "click to cancel" rule in its entirety last month, forcing companies to reconsider their subscription and automatic renewal models.
Companies must reevaluate their compliance obligations and may find that many of the requirements set forth in the now-vacated rule are still applicable on both the state and federal levels.
According to the court, the FTC failed to comply with its procedural obligations during the rulemaking process when it was considering the Rule Concerning Recurring Subscriptions and Other Negative Options Programs, and that such deficiencies were "fatal."
In a purported effort to update the Negative Option Rule to better address contemporary subscription models, the FTC in 2019 issued an Advance Notice of Proposed Rulemaking seeking comment on the Negative Option Rule.
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