Written by: Haim Ravia, Dotan Hammer
The Federal Trade Commission’s (FTC) Negative Option Rule (the “Click-to-Cancel”), which was designed to significantly impact businesses using online subscriptions, was vacated by the Circuit Court of Appeals for the Eighth Circuit, just a week before it was due to take effect.
The rule targeted negative option programs where a seller can interpret a consumer’s silence or failure to act as an acceptance of a retail offer, such as prenotification plans, continuity plans, automatic renewals, and free trial conversion offers. The Rule sought to require sellers to obtain the consumer’s expressed informed consent to the negative option before the free trial portion of the transaction and provide easy cancellation options.
The court vacated the rule on procedural grounds because the FTC did not timely issue a regulatory analysis. An analysis is required when the proposed rule is expected to have an economic impact above a certain threshold.
Click here to read the Court’s decision in Custom Communications v. the FTC.
