A federal appeals court has struck down the Federal Trade Commission’s (FTC) “click-to-cancel” rule, which was set to take effect on July 14, 2025. This rule aimed to simplify the cancellation process for subscription services, ensuring it would be as easy as signing up.
However, the US Court of Appeals for the 8th Circuit unanimously ruled that the FTC did not follow the full legal process required to enact such a regulation. The panel, composed of three judges, emphasized procedural shortcomings rather than the merits of the rule itself.
FTC Skipped Mandatory Preliminary Analysis Despite Significant Economic Impact, Court Firmly Rules
The court noted that while it sympathized with the FTC’s concern over deceptive marketing practices in subscription services, the Commission failed to comply with rulemaking requirements outlined in federal law. Specifically, the FTC did not conduct a preliminary regulatory analysis, which is mandatory if a rule is expected to have an annual economic impact of $100 million or more. Despite an administrative law judge later determining that the threshold had been exceeded, the FTC issued only a final regulatory analysis—an action the court deemed legally insufficient.
Federal Court Overturns FTC’s Click-to-Cancel Rule, Citing Legal and Procedural FailuresIn defending its approach, the FTC argued that a separate preliminary analysis was unnecessary and that any oversight was harmless since alternative options and compliance costs were discussed during the rulemaking process. The judges firmly rejected this reasoning, stating that federal law requires a preliminary analysis in all such cases, regardless of whether the final analysis is comprehensive. They emphasized that this step is vital to allow public feedback and proper scrutiny of the rule’s potential effects.
Legal Opposition and Political Shifts Undermine FTC Rule Amid Regulatory and Economic Concerns
The rule faced stiff opposition from several industry groups, including cable companies, which filed lawsuits in four federal circuit courts. These cases were eventually consolidated in the 8th Circuit.
The court concluded that the absence of a preliminary regulatory analysis deprived businesses and industry groups of the opportunity to meaningfully assess and respond to the FTC’s cost-benefit analysis. This, the court warned, could set a precedent allowing agencies to sidestep public input by underreporting initial economic impacts.
The rule was introduced in March 2023 and passed in a 3-2 vote in October 2024 during Lina Khan’s tenure as FTC Chair. Both Republican commissioners, Melissa Holyoak and Andrew Ferguson, opposed the rule. Ferguson now chairs a Republican-only Commission following the dismissal of the last two Democratic commissioners.
Holyoak’s dissent criticized the rule as overly broad and politically motivated, warning of its legal vulnerability. Though the FTC portrayed the rule as a consumer protection measure, the court’s decision reflects the complex intersection of administrative law, economic impact, and political dynamics in federal rulemaking.
