FTC Announces Final ‘Click-to-Cancel’ Rule

The Federal Trade Commission (FTC) has announced its final “click-to-cancel” rule that will require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. Most of the final rule’s provisions will go into effect 180 days after it is published in the Federal Register.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Commission Chair Lina M. Khan. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

The rise of e-commerce fueled growth in subscription services in beauty and household care.  

Brands like Ipsy soared in popularity in the beauty market. DTC razor brands including Harry’s and Dollar Shave became fast-rising players in men’s grooming with automatic shipping of products. In home care, brands such as Grove Collaborative and Blueland offer consumers subscriptions to cleaning products.

In 2021, beauty boxes captured 23% of subscription users in the US, more than food and drink and fashion at 15%, according to data shared by Emarsys, a customer engagement platform.

According to Imarc Group, the global subscription box market will show a growth rate (CAGR) of 14% between 2024 and 2032.

FTC Rule

FTC said its updated rule will apply to almost all negative option programs in any media.

The FTC rule also will prohibit sellers from misrepresenting any material facts while using negative option marketing; require sellers to provide important information before obtaining consumers’ billing information and charging them; and require sellers to get consumers’ informed consent to the negative option features before charging them.

This final rule is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy where it’s easier than ever for businesses to sign up consumers for their products and services, said the agency.

FTC’s March 2023 announcement of a notice of proposed rulemaking resulted in more than 16,000 comments from consumers and federal and state government agencies, consumer groups, and trade associations.

While negative option marketing programs can be convenient for sellers and consumers, the FTC receives thousands of complaints about negative option and recurring subscription practices each year. The number of complaints has been steadily increasing over the past five years and in 2024 the Commission received nearly 70 consumer complaints per day on average, up from 42 per day in 2021.

The final rule will provide a consistent legal framework by prohibiting sellers from:

• misrepresenting any material fact made while marketing goods or services with a negative option feature;

• failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;

• failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and

• failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.

FTC dropped a requirement that sellers provide annual reminders to consumers of the negative option feature of their subscription as well as a prohibition on sellers telling consumers seeking to cancel their subscription about plan modifications or reasons to keep to their existing agreement without first asking if they want to hear about them.

FTC has published a fact sheet summarizing the changes to the rule. 

FTC’s vote approving publication of the final rule in the Federal Register was 3-2. Commissioners Melissa Holyoak and Andrew N. Ferguson voted no. Commissioner Rebecca Kelly Slaughter issued a separate statement and Commissioner Holyoak issued a separate dissenting statement.