On Oct. 16, the Federal Trade Commission announced its final “click to cancel” rule. The rule is part of the FTC’s broader “Rule Concerning Subscriptions and Other Negative Options.” Notably, the click-to-cancel provision is not as straightforward as its moniker suggests. Here are four questions delving deeper into that portion of the rule. We will follow up with a separate post that looks at other aspects of the new rule.

What types of transactions does the new rule apply to? The new rule would expand what is considered a “negative option.” The current Negative Option Rule, which dates to 1973, covered only prenotification plans (think book-of-the-month club) in which a customer is periodically sent a product and is charged for the product unless the customer takes some action to decline the product. The new rule still covers prenotification plans but also covers continuity plans, automatic renewals, and free-to-pay plans. 

Continuity plans involve a customer receiving periodic shipments of goods or provision of services that continue until the customer cancels the agreement, such as bottled-water delivery. Automatic renewals are just what they sound like: a customer’s subscription for a product or service automatically renews when it expires unless the customer affirmatively cancels the subscription, for example, a magazine subscription or credit monitoring service. And under free-to-pay plans, a customer receives goods or services for free (or at a “low introductory rate”) for a trial period and then is automatically charged a fee (or a higher fee) when the trial period expires, unless the customer affirmatively cancels.

What does the click-to-cancel rule require? The new rule requires sellers “to provide a simple mechanism for a consumer to cancel the negative option feature; to avoid being charged, or charged an increased amount, for the good or service; and [to] immediately stop any recurring charges.” § 425.6(a) (defined-terms caps omitted). What is a “simple mechanism”? Well, it depends on how the customer signed up in the first place. Generally, the mechanism to cancel “must be at least as easy to use as the mechanism the consumer used to consent to the negative option feature.” § 425.6(b). That means a customer must have the option to cancel “through the same medium the consumer used to consent to the negative option feature,” with additional requirements depending on the medium:

  • Cancellation by “Interactive Electronic Medium” — which is any means of electronic communication other than telephone calls, such as Internet, mobile apps, text, chat, instant messages, emails, etc. The mechanism for canceling “must be easy to find.” In addition, a customer cannot be required to communicate with a live person or chatbot to cancel if the customer did not do so when enrolling.
  • Cancellation by telephone. If the customer enrolled by telephone, the seller “must promptly effectuate cancellations requested by the consumer via a telephone number.” The telephone number must (a) be either answered or recorded messages, (b) be available during normal business hours, and (c) not be more costly than the call the customer used when enrolling or consenting to the negative option.
  • Cancellation when consent was obtained in person. If consent to the negative option was obtained in person (such as by a sales representative for a bottled-water delivery service or a landscaping service), then, where practical, the option to cancel via an in-person method must be permitted. In addition, the seller must also offer the “simple mechanism” to cancel through either an Interactive Electronic Medium consistent with (1) or by providing a telephone number consistent with (2).

What does the new rule not do? The FTC’s originally proposed rule would have required sellers to provide annual reminders to customers of the negative option. It also would have prohibited sellers from forcing customers to receive “saves,” which were defined as “any additional offers, modifications to the existing agreement, reasons to retain the existing offer, or similar information when a consumer attempts to cancel.” The FTC did not adopt these provisions but has kept the record open to seek further comments.

When does click-to-cancel go into effect? The click-to-cancel rule in § 425.6 will go into effect 180 days after the rule is published in the Federal Register (expected to occur in the coming weeks). Some groups, however, have already sued to block the rule. See Telecom group sues to block FTC’s ‘click to cancel’ rule.” See also the filings here and here.

Photo of Michael J. Zbiegien, Jr. Michael J. Zbiegien, Jr.

Mike has represented companies in nation-wide class actions, including matters related to the Fair Credit Reporting Act, consumer issues, employment issues, and insurance rates. In addition, Mike has experience in disputes related to technology issues, such as IT architecture, intellectual property, social media…

Mike has represented companies in nation-wide class actions, including matters related to the Fair Credit Reporting Act, consumer issues, employment issues, and insurance rates. In addition, Mike has experience in disputes related to technology issues, such as IT architecture, intellectual property, social media and cybersecurity issues. Mike also represents businesses and individuals in lawsuits related to contract disputes, mergers and acquisitions disputes, noncompete agreements and restrictive covenants, business valuation disputes, UCC issues, and commercial leases.