As has been widely reported, the Eighth Circuit issued a decision this week vacating the Federal Trade Commission’s Click-to-Cancel Rule, which had been scheduled to spring into effect on July 14. In the grand scheme of things this ruling may not come as too much of a surprise, as the plaintiffs in the consolidated cases made some strong arguments regarding the “arbitrary and capricious” nature of the Rule and its overly broad application. Ultimately those questions were not reached, as the court vacated the Rule based on the FTC’s failure to comply with the appropriate procedures during the rulemaking process – specifically, that the Commission skipped the preliminary regulatory analysis that was required to be done.
At this point no one knows for certain what will happen with the Rule and whether the FTC will seek emergency relief or potentially go back to the drawing board and try a do-over (and conduct the analysis they skipped the first time). Either of these is probably a longshot, because – despite the Republican Commissioners’ decision to defend the Rule in these cases in the Eighth Circuit – they have previously voiced opposition to the Rule when it was promulgated (and Democrats were in charge of the Commission), and Chairman Andrew Ferguson has indicated that the Commission’s focus under his watch will be on enforcing existing laws rather than making new ones.
What people might be missing here, though, is that even if the Click-to-Cancel Rule goes away, that does not mean that the tactics it was designed to prohibit should now be considered “legal”. Just because the FTC doesn’t have a specific RULE covering those activities (which would give the Commission a shortcut to take violators directly to court and seek civil penalties), the FTC can still challenge businesses under Section 5 of the FTC Act and/or under the Restore Online Shoppers’ Confidence Act (ROSCA) (which is what it is relying on in several currently-pending suits).
Further, California’s amendments to its autorenewal statute took effect on July 1 and mimic much of what was in the Click-to-Cancel Rule, so for any autorenewal subscription program that targets customers in California, the provisions of the Click-to-Cancel Rule are for most practical purposes alive and well (at least for B2C contracts).
The net result here is that, regardless of the fate of the Click-to-Cancel Rule, businesses should mind their p’s and q’s when it comes to how they market their autorenewal subscription programs, how they enroll customers, and how their cancellation processes work. If you had been updating your subscription model in anticipation of the Click-to-Cancel Rule, your best course of action is to complete the play; doing so will not only help future-proof you if the Rule is resurrected, but will also aid you in complying with the myriad of state laws that are currently on the books.
