On July 8, 2025, the Eighth Circuit struck down the Federal Trade Commission’s (FTC) Negative Option Rule (often described as the “Click-to-Cancel Rule”), which was due to come into full effect on July 14. The appeals court, which was presiding over consolidated petitions from the Fifth, Sixth, Eighth, and Eleventh Circuits, determined that the FTC failed to properly follow its own rulemaking procedures and vacated the rule in its entirety. We had previously covered the challenges to the rule, and the FTC’s response to those challenges, here.
In vacating the rule days before it was set to be enforced, the court found that the FTC had failed to provide a preliminary regulatory analysis that was required when it was determined that the rule’s compliance costs would exceed $100 million. That preliminary analysis would need to contain “a description of any reasonable alternatives to the proposed rule which may accomplish the stated objective of the rule” and “a preliminary analysis of the projected benefits and any adverse economic effects and any other effects” of the proposed rule and each alternative. Instead, the FTC only provided a final regulatory analysis when it published the final rule, which the court found deprived the plaintiffs of an opportunity to provide comments on the analysis.
The FTC now has three principal options for how to proceed following the Eighth Circuit’s ruling. First, the FTC can appeal to the Supreme Court within 90 days, though this can be extended for another 60 days by a Justice of the Supreme Court. Second, the FTC could return to the rulemaking process and correct the error identified in the Eighth Circuit’s ruling. This would likely involve publishing a preliminary regulatory analysis with an accompanying comment period, before reissuing a new final rule. Third, the FTC could decide to walk away from the rule, which was originally opposed by both Chair Andrew Ferguson and Commissioner Melissa Holyoak.
Of note, the Trump-Vance FTC defended the rule against the recent challenges despite the earlier opposition. In response to the recent ruling, Commissioner Mark Meador, President Trump’s most recent appointment to the FTC, stated on X (formerly Twitter), that “[t]he FTC’s click-to-cancel rule, which would have made it much easier for consumers to get rid of unwanted online subscriptions, isn’t going into effect for one reason: the Biden FTC cut corners and didn’t follow the law. Process matters.”
At this stage, how the FTC will proceed with its now-halted rule is difficult to predict, though it is clear that enforcement of the rule is no longer on the horizon. This does not mean, however, that the FTC is completely out of ammunition to fight against what it views as unfair or deceptive conduct around subscriptions.
As we noted in our previous advisory, in April the FTC filed suit against Uber, alleging among other things that the company made it difficult for consumers to cancel their subscription services. The FTC brought that case under the Restore Online Shoppers’ Confidence Act (ROSCA), which is limited to online sales but contains requirements similar to the Click-to-Cancel Rule, including that sellers of goods or services featuring a negative option feature (such as automatic renewals, continuity plans, or free-to-pay conversions) on the internet (1) provide a clear disclosure of all material terms; (2) obtain the consumer’s consent before charging the consumer; and (3) provide simple mechanisms for the consumer to cancel recurring charges. Violations of ROSCA are subject to civil penalties of up to $53,088 per violation.
In addition, some states, including California, have laws that require easy cancellation for subscription sales. Given all this, companies would be well advised to work with their legal departments or outside counsel to ensure their practices meet these requirements.
If you have any questions, or would like additional information, please contact one of the attorneys on our Consumer Protection/FTC team.
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