Key Takeaways
- Beginning May 14, businesses offering "negative option features" can incur significant financial penalties for each violation of the FTC's "click-to-cancel" rule.
- The rule imposes obligations related to disclosure, informed consent, simple cancellation, and more.
- The rule joins a number of state laws targeted at deceptive and unfair subscription practices.
On May 14, 2025, the bulk of the requirements of the Federal Trade Commission's (FTC) Negative Option Rule, also known as the "click-to-cancel" rule, goes into effect. (The rule's prohibition on material misrepresentations went into force earlier in the year, on January 14.) The rule affects businesses offering "negative option features"—including free-to-pay trials and recurring subscriptions—and can trigger civil penalties of up to $53,088 per violation. Unlike many state laws on automatically renewing subscriptions, the rule applies to both business-to-consumer and business-to-business transactions.
Primary Obligations
As discussed in more depth in our prior Update, the rule imposes the following key obligations:
- Businesses must clearly and conspicuously disclose all material terms before obtaining a consumer's billing information in connection with a negative option. Certain specified terms must appear immediately adjacent to the means of recording the consumer's consent.
- Sellers must obtain consumers' express, informed consent to the negative option before charging them. The required consent must be obtained separately from other portions of the transaction.
- Businesses must provide a "simple mechanism" to cancel the negative option that immediately stops any recurring charges, and the mechanism must be as easy to use and in the same medium as the mechanism for customers to sign up.
- Businesses may not misrepresent any material facts in connection with the promotion or offering of a negative option, including material facts concerning the underlying transaction.
In fall 2024, the FTC's Republican commissioners at the time, Andrew Ferguson and Melissa Holyoak, objected to the rule's adoption. Nevertheless, the FTC under the leadership of Ferguson—now the agency's chairman—filed a brief in the U.S. Court of Appeals for the Eighth Circuit fully defending the rule against a number of legal challenges.
Other FTC and State Law Requirements
Whatever the outcome of the court challenges, the FTC can continue to pursue deceptive and unfair subscription practices under Section 5 of the FTC Act and the Restore Online Shoppers' Confidence Act, among other authorities—as it has done with some frequency in recent years, often with bipartisan support.
Further, a large and growing body of state auto-renewal laws impose additional requirements beyond those enforced by the FTC. For example, amendments to California's auto-renewal law that go into effect July 1, 2025 (see our Update here), impose more prescriptive requirements concerning the cancellation process and discount offers (often called "save attempts") made to customers who have indicated an interest in cancellation. Similarly, California and a number of other states require notices before subscriptions renew. The FTC's rule specifies that it does not supersede state law requirements that go beyond the protections required by the rule.
Businesses that offer free trials or recurring subscriptions should review their practices—including disclosures, consent mechanisms, cancellation procedures, and recordkeeping. Perkins Coie's Chambers-ranked Advertising, Marketing, and Promotions group has significant experience advising clients in matters related to the FTC click-to-cancel rule, state auto-renewal laws, and regulatory inquiries related to such issues.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
