FTC Proposes Rule Targeting Subscription Renewal Manipulation

The FTC issued a proposed rule Thursday requiring companies to “make it as easy to cancel” subscriptions as “it was to sign up.” The proposed “click to cancel provision” would help consumers avoid the “seemingly never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships,” the agency said. The commission voted 3-1 along party lines to issue a notice of proposed rulemaking that would modify the FTC’s Negative Option Rule. That rule regulates how companies interpret a consumer’s failure to act as the acceptance of an offer. States have been moving forward with laws targeting subscription renewal policies due to the rise in streaming and online services (see 2112200060). “Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,” said FTC Chair Lina Khan. “The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.” The agency will gather public comment once the notice is published in the Federal Register. The proposal calls for companies to have a “simple cancellation mechanism.” A consumer would be able to cancel on the same website they subscribed in the same number of steps, the FTC said. Companies would have to ask consumers for consent to make additional offers when a user tries to cancel, the agency said: “In other words, a seller must take ‘no’ for an answer and upon hearing ‘no’ must immediately implement the cancellation process.” The rule also contemplates requiring companies to provide annual reminders “to consumers enrolled in negative option programs involving anything other than physical goods, before they are automatically renewed.” The proposed changes would apply to “all forms of negative option marketing in all media,” including phone, internet, print media and in-person transactions. Wilson said the proposal attempts an “end-run around” the Supreme Court’s decision in AMG (see 2104260065) to “confer de novo redress and civil penalty authority on the Commission for Section 5 violations unrelated to deceptive or unfair negative option practices.” Manipulative tactics involving subscription services have gotten worse over time, Khan said in a joint statement with Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya: The rule creates a “powerful deterrent by introducing the risk of civil penalties.”