Late Friday, the FTC announced that the Commission had voted 3-0 to extend the compliance deadline for the to-be-effective provisions of the Negative Option Rule, formerly known as the "Click to Cancel Rule." While the Ferguson-led FTC appears to no longer embrace the Khan era branding of "click to cancel," more importantly, it appears that all of the provisions of the Rule will take effect as written in July, barring court action in pending litigation.
As we previously discussed here and here, the amendments greatly expand the current scope of the Rule to cover any goods or services involving a negative option or automatic renewal plan, including free trials, subscriptions, and repeat delivery offers, and impose new restrictions and requirements that go beyond some state laws governing automatic renewals. A few important flags:
- The Rule prohibits sellers from misrepresenting any material fact while marketing using negative option feature, even if that fact is unrelated to the negative option feature – an expansion that is being challenged in court, amongst other provisions. This provision became effective on January 15, 2025.
- The remaining provisions – related to disclosure, consent, and cancellation of negative option features – were slated to take effect next week on May 14. But the Commission's statement on Friday cast blame on the prior administration for declining to "explain why this specific deferment period was chosen," and extending the compliance date for those provisions for an additional 60 days "to ensure ample time for companies to conform their conduct to the Rule." (Perhaps not coincidentally, enforcement of California's similar amended automatic renewal law begins July 1.)
- Most importantly, however, the Commission statement indicates that "[s]tarting July 14, 2025, regulated entities must be in compliance with the whole of the Rule because the Commission will begin enforcing it." The statement concludes by indicating that the Commission is "open to amending the Rule" to address problems, but suggests no immediate intent to do so.
Meanwhile, the Eighth Circuit is considering a challenge to the rule on several grounds by industry groups. The court declined to stay the implementation dates in January, and the FTC in March continued to defend the rule in robust briefing – previewing but not confirming the direction of last night's statement since standard briefing does not require a vote of the Commission. While briefing is complete in that case, it remains to be seen whether a decision will be issued before the new July 14 effective date, and the overarching prohibition against misrepresentations remains effective, as noted above.
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