In a blow to consumers, streaming platforms won’t have to make it easier to cancel subscriptions.
A federal appeals court on Tuesday struck down the FTC‘s “click to cancel” rule, which would’ve required companies to provide users with simple cancellation mechanisms to immediately halt all recurring charges and get their consent to convert auto-renewals and free trials to paid enrollments. Under the measure, businesses would’ve been barred from making it more difficult to cancel than it is to sign up. It was intended to eliminate drawn-out cancellation processes aimed at trapping users in unwanted subscriptions.
The FTC, which declined to comment, was set to begin enforcing the rule on July 14. It was initially set to take effect in May but was delayed as President Trump’s FTC moves to ease off the hard line stance on consumer protection the agency took under former chair Lina Khan, who was widely criticized by the business community for disregarding industry concerns.
The measure was implemented as part of a broader crackdown on deceptive subscription practices. In 2023, the agency sued Amazon for allegedly duping consumers into signing up for its Prime service and then impeding them from canceling their enrollment. The lawsuit, which alleged that some users intended to sign up solely for Prime Video, detailed an intentionally labyrinthine cancellation process requiring users intending to cancel their subscriptions to navigate a four-page, six-click, 15-option cancellation process.
With the new rule, Amazon — along with Hulu, Max and Disney+, among others — would’ve had to simplify the process for users to cancel subscriptions. They all offer automatically recurring enrollments, an area that the FTC heavily scrutinized under Khan.
In 2023, The Hollywood Reporter subscribed to and canceled Prime Video, the Disney+ Hulu bundle, Max, Netflix and Peacock to compare the processes. Amazon was found to be the most tedious in terms of clicks required to finalize a cancellation. Most offered users a discount or alternate plan, which was also under fire for obstructing the process to immediately cancel a subscription.
In a statement, Netflix said “members can cancel their membership at any time.”
The rule was met with pushback by the Motion Picture Association. In a filing, it said that the changes are “unworkable” and will “hamper industry while doing little to protect consumers.” The measure was later challenged by an industry group representing cable and internet provider, which argued that the FTC overstepped its authority.
In Tuesday’s ruling, the U.S. Court of Appeals for the Eighth Circuit found that the FTC skipped a key procedural requirement in implementing the initiative. This deprived companies of the opportunity to dissuade the agency from adopting it, the court said.
To issue a rule, the FTC must issue a preliminary analysis that includes an assessment of the effectiveness of the measure and alternatives to the proposal. But the agency didn’t do so under an exemption to this requirement for rules with an estimated economic effect under $100 million, which was found to be wrong.
“While we certain do not endorse the use of unfair and deceptive practices,” the court said that the “procedural deficiencies of the Commission’s rulemaking process are fatal here.” It added, “The opportunity to be heard earlier on” could’ve “impacted the Commission’s decision-making on the scope of the final Rule and on whether alternatives, which would have received more substantive consideration by the Commission and regulated entities, were indeed viable.”
In a post on X, FTC commissioner Mark Meador said the measure won’t go into effect because “the Biden FTC cut corner and didn’t follow the law.” The rule was passed in 2023, with agency chair Andrew Ferguson opposing the measure.
The future of the initiative remains unclear, though the FTC under Ferguson has continued to scrutinize subscription practices. In April, the agency sued Uber for allegedly trapping users in tough-to-cancel subscriptions.
