Federal appeals court rules that mandatory 'click to cancel' to make paid subscriptions easier to cancel is 'invalid'

The Federal Trade Commission (FTC) of the United States has established a rule requiring 'Click to Cancel' to cancel paid subscription services with just a click, stating that cancellation should be as easy as signing up for them. However, a federal appeals court ruled that the FTC's rule, which was scheduled to take effect on July 14, 2025, is invalid.

Custom Communications, Inc. v. Federal Trade Commission, 24-3137 – CourtListener.com
https://www.courtlistener.com/docket/69305486/custom-communications-inc-v-federal-trade-commission/

Court nullifies “click-to-cancel” rule that required easy methods of cancellation - Ars Technica
https://arstechnica.com/tech-policy/2025/07/us-court-cancels-ftc-rule-that-would-have-made-canceling-subscriptions-easier/

Starting around 2023, under the Joe Biden administration, the FTC has proposed a 'Click to Cancel' provision based on three points: 'simple cancellation method,' 'automatic renewal reminder and confirmation,' and 'ability to cancel additional service proposals before cancellation,' revising the negative option regulations enacted in 1973, stating that cancellation of paid subscription services should be made clear and simple. The final rule making this Click to Cancel mandatory was announced in October 2024.

Federal Trade Commission announces final rules for 'click to cancel' to make it easier for consumers to cancel paid subscriptions - GIGAZINE

However, during the committee vote on whether to approve the rule, there were dissenting voices that argued that 'because 'unfair and deceptive practices' are not specifically defined, the rule does not meet legal requirements and could harm consumers and competition.'

In response to the rule making Click to Cancel mandatory, the cable television industry group National Cable Television Association (NCTA), the online advertising standards organization Interactive Advertising Bureau (IAB), and the security industry group Electronic Security Association (ESA) have filed a lawsuit asking the court to block the final rule, stating that 'the FTC's rule seeks to regulate consumer contracts of all companies in all industries and sectors that offer services or subscriptions that continue unless the customer chooses to cancel them.'

Cable TV industry groups ask court to block one-click subscription cancellation rules - GIGAZINE

On July 8, 2025, a federal appeals court ruled that the FTC's rules were invalid, finding that the FTC had 'failed to follow important legal procedures in enacting its rules.'

The court's biggest problem was that the FTC failed to conduct a detailed cost-benefit analysis known as a 'preliminary regulatory analysis,' which the FTC is required to conduct if a proposed rule would have an annual economic impact of $100 million or more and to present alternative rulemaking options, their respective costs and benefits, and solicit comments from interested parties.

The FTC initially determined that the impact of amending the negative option rule would be less than $100 million and therefore did not believe this analysis was necessary, but a subsequent hearing by an administrative law judge concluded that 'the actual economic impact would exceed $100 million. ' Nevertheless, the FTC proceeded without conducting a preliminary regulatory analysis and decided on the final rule, according to the court's decision.

The FTC argued that even if there had been procedural errors, they would not have affected the outcome, but the court rejected this argument, stating that 'the lack of a preliminary regulatory analysis did not provide sufficient time for trade groups and companies to challenge the FTC's findings,' and that 'the FTC's findings were not merely formal errors; they caused substantial prejudice to the parties involved.'

When the final rules were established, the FTC was under the Joe Biden administration, with three members who voted in favor and two who voted against being Democrats and Republicans, respectively. However, President Donald Trump dismissed the two Democrats from the FTC, leaving the FTC's members entirely Republican at the time of writing. Commissioner Andrew Ferguson, who voted against the rules, was serving as chairman of the FTC at the time of writing, and it is unclear whether the invalidated rules will be re-established through the correct procedures.