Adult Attorney | Adult Lawyer (248) 290-0655 Email

FTC’s “Click to Cancel Rule” and its Legal Challenge

Bright red cancel button

The Federal Trade Commission’s (FTC) new “Click to Cancel Rule” or the “Rule”, has been a hot topic in consumer protection and business regulation. This Rule, part of a broader effort to streamline cancellation processes for subscription services, has sparked significant debate and legal challenges, particularly from the National Cable and Telecommunications Association (“NCTA”). Adult entertainment subscription services are justifiably concerned, need to be following these developments very closely and preparing for compliance with the Rule immediately.

What is the Click to Cancel Rule?

Let’s begin with the basics and some background on the Rule. The FTC recently finalized the “Click to Cancel” rule, a significant regulation aimed at simplifying the process for consumers to cancel recurring subscriptions and memberships. This Rule mandates that businesses must make it as easy to cancel a subscription as it was to sign up for it. The rule is part of the FTC’s broader effort to protect consumers from deceptive practices associated with negative option marketing, where a consumer’s failure to take action is interpreted as consent to continue a service. Under the Rule, companies must offer consumers the ability to cancel subscriptions with the same ease as signing up for them.

In short, the rule aims to address consumer complaints about predatory practices where companies make cancellations deliberately complicated, locking customers into unwanted subscriptions.

What does the Click to Cancel Rule Require?

In broad strokes, the Click to Cancel Rule requires:

Simple Cancellation Mechanism

Businesses must provide a straightforward method for consumers to cancel their subscriptions. If a consumer can sign up online, they must also be able to cancel online in a similar number of steps.

Clear Disclosures

Companies are required to clearly disclose all material terms before obtaining a consumer’s billing information. This includes information about the subscription’s cost, duration, and how to cancel.

Informed Consent

Businesses must obtain explicit consent from consumers before charging them for a subscription. This ensures that consumers are fully aware of what they are agreeing to.

Prohibition of Misleading Practices

The Rule prohibits any material misrepresentations in connection with the sale of a product or service that includes a negative option feature.

    Impact of the Right to Cancel Rule

    Assuming that the Rule survives the legal challenges against it (as discussed below), the impact of the Click to Cancel Rule would be substantial for businesses and consumers alike. For businesses, the Rule will require operational changes and require companies to update their cancellation mechanisms. This of course will be challenging for smaller businesses because of the costs associated with implementing systems to comply with the requirements of the Rule. On the opposite end of the spectrum, consumers are celebrating because the Rule simplifies the cancellation process, reducing frustration for those seeking to end subscriptions and because the Rule requires more greater upfront clarity on subscription terms that can help consumers make informed decisions.

    Legal Challenges and the NCTA Lawsuit

    New FTC rules have historically resulted in legal challenges and the Click to Cancel Rule is no different. The National Cable and Telecommunications Association (“NCTA”), representing major broadband and cable companies, has filed a lawsuit challenging the FTC’s authority to implement the Click to Cancel Rule. The following are the main arguments raised by the NCTA in its legal challenge.

    Overreach of Authority

    The FTC exceeded its authority under the Federal Trade Commission Act. The NCTA argues that the FTC cannot unilaterally impose such detailed rules without clear legislative backing;

    First Amendment Concerns

    The NCTA raises concerns that the rule infringes on companies’ rights to communicate with customers, particularly regarding their ability to offer discounts or incentives to retain subscribers; and

    Economic Impact

    The NCTA contends that compliance with the rule would impose undue financial burdens on businesses, particularly smaller providers that lack sophisticated online platforms.

      The FTC, however, defends the rule as essential for consumer protection against deceptive subscription practices. They believe the rule empowers consumers to easily cancel unwanted subscriptions and reduces the frustration of complex cancellation processes.

      The legal battle raises important questions about the balance between consumer protection and industry regulation. The outcome will significantly impact businesses across various sectors that rely on recurring subscription models.

      The Implications

      The outcome of the NCTA lawsuit could have far-reaching implications. A victory for the FTC would reaffirm the agency’s ability to impose rules aimed at consumer protection, potentially paving the way for further regulation in the subscription economy. Conversely, a ruling in favor of the NCTA could limit the FTC’s authority, shifting the regulatory landscape.

      The Click to Cancel Rule and the NCTA lawsuit highlight the tension between consumer rights and business interests, a dynamic that will likely shape regulatory policies in the subscription economy for years to come.

      As the NCTA lawsuit unfolds, businesses should closely monitor the situation and consider preparing for compliance with the “Click to Cancel” rule, even amid legal challenges. This may involve reviewing and updating cancellation processes to meet FTC requirements, developing clear communication strategies, and potentially adjusting customer retention strategies. The Rule’s impact on customer retention is a key concern. While it may limit personalized retention deals, businesses can still implement proactive measures to reduce cancellations, such as improving customer service, offering flexible billing options, and providing clear information about subscription terms. The “Click to Cancel” rule is a significant shift in consumer protection regulations and will likely shape the future of the subscription industry. Businesses must adapt to these changes to ensure compliance and maintain customer satisfaction.

      2024 was a rough year for adult entertainment websites especially those offering subscription services and rely on credit card transactions. The Click to Cancel rule didn’t make anything easier and many business operators are hoping for an NCTA victory and the elimination of the Click to Cancel rule. In the meantime, now is the time to speak with your legal advisors so that you understand the full implications for non-compliance with the Click to Cancel rule.

      This article does not constitute legal advice and is provided for your information only and should not be relied upon in lieu of consultation with legal advisors in your own jurisdiction. It may not be current as the laws in this area change frequently. Transmission of the information contained in this article is not intended to create, and the receipt does not constitute, an attorney-client relationship between sender and receiver.

      About Silverstein Legal

      Founded in 2006 by adult entertainment lawyer Corey D. Silverstein, Silverstein Legal is a boutique law firm that caters to the needs of anyone working in the adult entertainment industry. Silverstein Legal’s clients include hosting companies, affiliate programs, content producers, processors, designers, developers, and website operators.

      Related Articles

      Back To Top