Days before it was about to take effect, a federal appeals court blocked a click-to-cancel rule that would have compelled companies to make it simple for customers to cancel undesirable memberships and subscriptions.
Adopted in October, the Federal Trade Commission’s proposed reforms mandated that companies get a customer’s permission before charging for memberships, auto-renewals, and programs associated with free trial offerings.
At the time, the FTC stated that companies must also let customers cancel recurring subscriptions as simply as they initiated them and disclose when free trials or other promotional offers will expire.
The FTC’s idea was incorporated into the government-wide Time is Money effort, which was unveiled last year by the Biden administration to combat consumer-related inconveniences.
The U.S. Court of Appeals for the Eighth Circuit ruled this week that the FTC erred in procedure by neglecting to develop a preliminary regulatory analysis, which is necessary for rules that have an annual impact on the U.S. economy of more than $100 million. The FTC rule was scheduled to take effect on Monday.
The FTC argued that because it initially estimated that the rule’s impact on the national economy would be less than $100 million, it was exempt from having to develop a preliminary regulatory review. The economic impact would exceed the $100 million threshold, according to a court in administrative law.
The rule was declared void by the court.
The court stated that although we do not support the employment of unfair and misleading tactics in negative option marketing, the Commission’s rulemaking process’s procedural flaws are fatal in this case.
On Wednesday, the FTC declined to comment.
As of right now, the FDA is proceeding with its plans to conduct a trial of Amazon’s Prime service. The trial is based on a case filed by the Federal Trade Commission, which claimed that Amazon had enrolled customers in its Prime program against their will and made it difficult for them to quit their memberships.
It is anticipated that the trial will occur the following year.
