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topicnews · October 25, 2024

The FTC’s “click-to-cancel” rule is criticized: companies are suing to have it blocked

The FTC’s “click-to-cancel” rule is criticized: companies are suing to have it blocked

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Streaming services and other companies are suing against a new regulation that is intended to make it easier to cancel subscriptions and memberships.

NCTA — The Internet & Television Association, which represents major cable and Internet providers like Charter Communications and Comcast as well as media companies like Disney and other trade groups, says the Federal Trade Commission overstepped its authority with the “Click to Cancel.” Rule.

The complaint, filed with the 5th U.S. Circuit Court of Appeals, alleges that the new rule could cover up to 1 billion paid subscriptions in the United States and is “arbitrary, capricious and an abuse of discretion.”

Also behind the lawsuit are the Interactive Advertising Bureau, which represents the online advertising industry, and the Electronic Security Association, which represents the home security industry.

The FTC declined to comment.

Under the rule, which went into effect on October 16, companies must obtain consent for subscriptions, automatic renewals and free trials that convert to paid memberships. Canceling services must be “at least as easy” as signing up, the FTC said.

Click to cancel rule: FTC wants to solve the subscription problem

The FTC rule is part of President Joe Biden’s efforts to crack down on “junk fees.” Vice President Kamala Harris, the Democratic nominee for the White House, spoke about the proposed click-to-cancel rule in September.

The rule passed 3-2, with the FTC’s two Republican commissioners voting against it.

While some subscriptions can be canceled with a few clicks or a phone call, when companies make it difficult to cancel a subscription, customers can end up with monthly fees long after they no longer want or need a product or service.

Complaints about the difficulty of canceling subscriptions have increased significantly in recent years. The FTC estimates that it receives an average of nearly 70 per day.

Trade groups representing advertisers, news publishers, retailers and other industries argue that a multi-step cancellation process protects consumers or allows them to take advantage of a cheaper deal. They say the new FTC rule puts too much of a burden on companies and is unnecessary.

“We’re not sure why some companies find it a burden to be transparent with potential customers about pricing and terms and to honor cancellation requests when someone no longer wants to be your customer,” said Teresa Murray, director of consumer protection at the Public Interest Research Group, told USA TODAY: “It appears that many companies have relied on tricks and traps to attract and retain customers.”

Murray noted that some companies have already voluntarily complied with the new FTC rules by providing upfront pricing and making cancellation as easy as signing up.

“It is notable that many companies welcome these new rules because they create a level playing field for companies trying to compete with others who may not disclose price increases and other terms,” she said.

Consumer advocates on Wednesday accused the industry groups of “venue shopping” by filing the lawsuit with a conservative-leaning federal appeals court.

Twelve of the active justices were appointed by a Republican president, six of them by former President Donald Trump.

“The big companies that use fraudulent subscription models to trap customers are trying to sue their way out of this regulation in order to reduce costs for millions of consumers,” said Liz Zelnick, director of the Economic Security Program and corporate power at watchdog group Accountable.US in a statement. “We’ve seen this movie before, where major industry players buy into a business-friendly jurisdiction regardless of the impact on Americans.”

The trade groups could not immediately be reached for comment.

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