FTC Signals Enforcement On Auto-Renewing Subscriptions And Sales

Highlights

The Federal Trade Commission (FTC) on April 21, 2025, sued Uber in the U.S. District Court for the Northern District of California for allegedly engaging in unfair and deceptive practices related to its auto-renewing Uber One subscription service.
The FTC's lawsuit alleges that Uber failed to clearly and conspicuously disclose material information about its auto-renewing subscription, failed to permit customers to easily cancel their subscriptions and misrepresented the amount of savings that customers would achieve by signing up for Uber One. The allegations in the FTC's lawsuit are similar to those made in another settlement with Cleo AI that the FTC announced in March 2025.
The FTC's recent actions, approved by its current commissioners, signal that the agency intends to enforce requirements related to auto-renewing sales, likely including those that take effect on May 14, 2025, when the FTC's new Click to Cancel Rule (Rule) takes effect.
In addition to the FTC Rule's new requirements, companies that offer auto-renewing subscriptions and sales need to prepare for additional requirements imposed by changes to California law that will take effect in July 2025.

In January 2025, prior to President Donald Trump's inauguration, the Federal Trade Commission (FTC) finalized its Click to Cancel Rule (Rule). This regulation requires additional disclosures, consents and simple cancellation protocols for all auto-renewing subscriptions and sales. Since the Rule was finalized, there has been uncertainty as to whether the new Rule will be enforced, stayed by federal courts or simply ignored. However, recent actions by the FTC indicate that the new Rule will be enforced, perhaps aggressively so.

This Holland & Knight alert analyzes what has happened since the Rule's announcement and why companies that advertise and offer auto-renewing subscriptions and sales should prepare for the FTC to actively enforce the new requirements. (For a more detailed description of the new Rule's requirements, please see Holland & Knight's previous alert, "The New Cancel Culture: The FTC's 'Click to Cancel' Rule," Oct. 30, 2024.)

Anticipated Impact of the Rule on FTC Future Investigations and Enforcement Actions

The Rule's May 14, 2025, effective date is likely to influence the FTC's enforcement strategies significantly, as evidenced by the agency's recent actions against companies such as Uber and Cleo AI. The FTC's Uber and Cleo AI lawsuits – approved by two Republican FTC commissioners who dissented during the rulemaking process on the Rule – foreshadow that the FTC will continue to investigate and penalize companies whose customers complain about confusing or deceptive subscription models. These actions suggest that the FTC expects every company with a business-to-consumer (B2C) or business-to-business (B2B) subscription-based model to be aware of and conform to the FTC's expectations of the Rule requirements as expressed in its recent complaints and settlements.

Though the FTC's new lawsuits did not allege violations of the new Rule (as it does not take effect until May 14, 2025), the Cleo AI settlement and allegations in the Uber lawsuit serve as a road map for what the FTC expects under the Rule. Companies that offer auto-renewing subscriptions and sales should heed the FTC's notice and ensure compliance with the Rule, as the FTC's focus on auto-renewal practices continues in this administration.

Recent FTC Enforcement Actions Involving Auto-Renewing Subscriptions and Sales

On April 21, 2025, the FTC sued Uber Technologies Inc. and Uber USA LLC for violations of the FTC Act and Restore Online Shoppers' Confidence Act (ROSCA) following an investigation into its auto-renewing Uber One subscription service. The FTC alleged that it received numerous complaints from consumers that Uber enrolled customers without proper disclosures and necessary consumer consents and that Uber utilized a complicated and circuitous cancellation process that oftentimes did not allow customers to cancel the services without being charged for the next renewal period.

More specifically, the FTC alleged that:

Uber obscured material information about cancellation and pricing during sign-up by using small, grayed-out text that consumers can easily miss.
When signing up for Uber One, customers were promised savings of $25 per month that did not manifest, often due to the fact that customers were unable to cancel the service.
After sign-up, which some customers claimed they never did but were enrolled into anyway, Uber charged the auto-renewing fee before the customer's billing date or expiration of their free trial.
When customers tried to cancel, Uber made it extremely difficult. Customers were forced to navigate as many as 23 screens to cancel their subscription. If customers tried to proceed with cancellation, Uber required them to first answer questions about why they wanted to cancel, urged them to pause their membership instead or, if that failed, presented them offers to stay. According to the FTC, this process usually ended in a "loop," sending customers back to previous screens without the ability to terminate the membership.
Some customers were told they'd have to contact customer support to cancel but were given no way to do so. Others claimed that Uber charged them for another billing cycle after they requested cancellation and were waiting to hear back from customer support.

The FTC's lawsuit against Uber seeks a permanent injunction, refunds for affected consumers and other relief.

The FTC's suit against Uber is similar to the suit that the FTC settled with Cleo AI in March 2025. In one of the first settlements since the new administration took office, the FTC sued and settled with Cleo AI to address allegations that Cleo AI violated the FTC Act and ROSCA. The FTC claimed that Cleo advertised same-day or instant cash advances in the hundreds of dollars but that consumers were required to enroll in an auto-renewing subscription service with monthly charges of $5.99 or $14.99. The FTC alleged that Cleo AI disclosed the eligible cash advance amounts only after consumers entered their payment information.

The FTC's complaint stated that almost no consumers received the advertised cash amounts and that it sometimes took days for them to receive the cash. Users were routinely offered amounts below $100, despite advertisements promising $250 to $500. Many users complained about the negligible cash advance amounts, and additional fees for same-day cash receipt were not clearly disclosed.

When consumers tried to cancel their subscription, the FTC alleged that Cleo AI made it difficult until the cash advance was fully repaid. During this time, the company continued charging customers for subscription plans. Cleo informed users that its systems would "not allow" or were "unable" to cancel due to outstanding loans.

Per the settlement, Cleo AI agreed to pay $17 million to the FTC so that the agency can distribute refunds to affected consumers. Cleo AI also agreed to implement new disclosure, consent and simple cancellation practices commensurate with the requirements of the FTC's new Rule.

Potential Penalties for Noncompliance with the Rule

The FTC's arsenal under the Rule includes:

Monetary Fines. Companies that fail to comply with the Click to Cancel Rule may face significant civil penalties, including a civil penalty for each violation of the Rule of up to $53,088.
Injunctions. The FTC may seek court orders to prevent further violations, which could disrupt business operations and require companies to change their subscription practices immediately and permit the FTC to monitor compliance for years following entry of the order.
Consumer Refunds. Companies may be required to provide refunds to affected consumers, which can result in substantial financial liabilities.
Reputational Damage. Public enforcement actions and lawsuits can damage a company's reputation, leading to a loss of customer trust and decreased sales.

Additionally, noncompliance could lead to private lawsuits from consumers as the Rule arguably establishes new standards of care as to auto-renewing subscriptions and overlaps with related state consumer protection laws, such as those in California.

How Can Companies Prepare?

Companies should review their subscription practices to ensure compliance with the forthcoming Click to Cancel rule, which mandates:

providing a cancellation method at least as simple and capable of being initiated through the same method used to initiate the transaction
clearly and conspicuously disclosing the terms of the transaction, including the existence of the negative option and how customers can terminate their agreements, prior to collecting the consumer's billing address
obtaining a consumer's affirmative consent to the recurring charges, automatic renewals or other negative option method utilized
maintaining proof of the consumer's consent for three years or one year after cancellation of the customer's account
refraining from making any misrepresentations in connection with negative option transactions

Other ways to help avoid scrutiny:

Enhance Transparency. Ensure that all material information regarding pricing, cancellation and terms is clearly disclosed to consumers during the sign-up process.
Simplify Cancellation Procedures. Develop a user-friendly cancellation process that allows customers to easily terminate their subscriptions without unnecessary hurdles. Utilize technology to enhance transparency and facilitate easy cancellation processes. Implement systems that automatically update practices in response to regulatory changes.
Train Employees on Compliance Principles. Provide ongoing training to employees on compliance with the new Rule to help reduce risk stemming from consumer complaints.
Monitor State Laws. Be aware of state-specific regulations that may impose additional requirements on subscription services. The FTC's new Rule does not preempt more restrictive state laws, and several states have enacted auto-renewal laws that are more stringent than the FTC's Rule. Of note, new and supplemental compliance requirements – including an annual notice requirement – will take effect in California in July 2025.

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.