FTC’s Proposed Click to Cancel Rule for Online Commerce

The Federal Trade Commission’s proposed click to cancel rule requires companies to provide more detailed information and notices about cancelling automatic renewals, subscriptions, and memberships which are prevalent in online commerce.  The proposed rule, titled Negative Option Rule, is at: https://www.ftc.gov/system/files/ftc_gov/pdf/p064202_negative_option_nprm.pdf

The goal of the proposed rule is to combat unfair or deceptive practices that include recurring charges for products or services consumers do not want and cannot cancel without undue difficulty.  The FTC is currently seeking comments on the proposed rule until April 19, 2023.

The proposed rule would require canceling via a negative-option program to be easy and available through the same means as signing up.  For example, if a company offers one-click membership sign-up through its website, then the company must also offer one-click cancellation through the same website.

Other substantive requirements of the proposed rule include annual reminders for customers of programs that do not involve the shipment of physical goods, pre-billing disclosure requirements, express consent for subscription terms separate from the rest of the transaction, and limits on the ability to offer special deals to customers attempting to cancel.

To help comply with this anticipated rule, companies should:

    • Catalog:  Catalog their negative-option marketing offerings under the broad definition provided by the FTC under the proposed rule
    • Representations:  Review the processes associated with these offerings, including representations they make concerning any aspect of a product or service involving negative-option marketing to ensure they are accurate
    • Pre-bill disclosures:  Review pre-billing disclosures to ensure all material terms of a deal are disclosed to consumers before they enter their billing information and that express consent to the subscription is obtained
    • Involve IT:  Communicate with their IT departments to develop a simple cancellation procedure which includes annual notifications for consumers.

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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.

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