The Cost Of Trapping Subscribers

In July 2025, the U.S. Court of Appeals for the 8th Circuit blocked the Federal Trade Commission's (FTC) new "click to cancel" rule, which had been scheduled to take effect on July 14, 2025. The rule would have required companies offering subscriptions, auto-renewals, or free trials to make cancellation at least as simple as the sign-up process—for example, the rule would have prohibited practices where customers signed up online but could only cancel by phone or through chatbots. However, the 8th Circuit found that the FTC had not followed proper procedures, particularly by failing to conduct a required cost-benefit analysis.

Despite the ruling, the FTC did not step back from scrutiny of subscription and cancellation practices. Instead, it turned to enforcement under existing statutory authority—most notably the Restore Online Shoppers' Confidence Act (ROSCA) and Section 5 of the FTC Act—to challenge companies whose cancellation or auto-renewal practices it views as unfair or deceptive. In practice, ROSCA establishes the baseline requirements that subscription providers must meet when offering "negative option" arrangements, such as automatically renewing subscriptions. Among other things, the statute requires that businesses:

• Disclose all material terms (e.g., cost, frequency, and description of services) before collecting billing information.
• Obtain express, informed consent for the charge (such as an affirmative action like checking a box).
• Provide a simple mechanism for consumers to cancel recurring charges, without undue friction or multi-step barriers.

Recent high-profile enforcement actions illustrate the FTC's enforcement of ROSCA and Section 5 of the FTC Act. In September, the FTC announced a $7.5 million settlement with Chegg, Inc., an education technology company, to resolve allegations that the company made it unduly difficult for consumers to cancel subscriptions. The FTC alleged that Chegg's cancellation process was intentionally burdensome, in some cases resulting in consumers being charged even after they attempted to cancel. Under the settlement, Chegg agreed to implement a simple cancellation mechanism and provide restitution to affected customers. The FTC cited internal communications describing cancellation as requiring "some pain" as evidence that the company intentionally introduced friction into the process.

Just days later, the FTC disclosed a far larger settlement with Amazon, under which the company agreed to pay $2.5 billion to resolve allegations that it deceptively enrolled consumers in its Prime program and made cancellation unnecessarily difficult. The settlement includes $1 billion in civil penalties and $1.5 billion in consumer redress, with automatic refunds to millions of affected Prime members. In addition to the financial penalties, Amazon agreed to reform its subscription practices, including clearer disclosures of terms, straightforward opt-out options, and more accessible cancellation. The FTC emphasized that Amazon's use of "dark patterns" (e.g., hiding cancel links, forcing multi-step menus, or requiring human agent calls) and internal strategies designed to slow or deter cancellation violated ROSCA and consumer protection law.

What Companies Should Do Now

To mitigate regulatory and reputational risk, subscription-based businesses should:

• Simplify Cancellation: Ensure cancellation is as easy—or easier—than sign-up. Avoid hidden menus, multi-step barriers, or requiring direct contact with customer service.
• Clearly Disclose Material Terms: Provide clear and prominent disclosure of price, renewal frequency, cancellation rights, and terms before collecting billing information.
• Obtain Affirmative Consent: Require clear, affirmative consent for recurring charges.
• Audit UX: Review UX designs to ensure they do not conceal the ability to cancel a subscription.
• Monitor Compliance: Regularly review subscription practices against FTC guidance and emerging enforcement trends.
• Document Changes: Maintain records of changes to subscription terms and cancellation processes to demonstrate good-faith compliance.

Conclusion

The FTC's recent actions confirm that the agency will continue robust enforcement of fair subscription and cancellation practices, with or without formal "click to cancel" regulations. Businesses should proactively align operations with these expectations to reduce risk, maintain consumer trust, and avoid costly enforcement actions.

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.