Court strikes down planned FTC click-to-cancel rule

A federal appeals court this week blocked the Federal Trade Commission’s new “click-to-cancel” rule, days before it would have gone into effect. The U.S. 8th Circuit Court of Appeals decided on Tuesday that the rule, which would have required a one-step process for canceling subscriptions or memberships, wasn’t developed using the right rulemaking procedures. The change would have taken place July 14.

What went wrong in rulemaking? The FTC must conduct a preliminary regulatory analysis if a rule has an estimated annual economic effect of $100 million or more. The FTC sent out a notice estimating that the rule’s economic effect would be lower than that threshold, according to court documents.

An administrative law judge issued a ruling that the FTC’s estimate was too low, but the commission didn’t conduct the preliminary regulatory analysis and instead issued its final analysis alongside the rule, according to court documents. The lack of a preliminary analysis left businesses without enough time to contest the FTC’s findings, judges said.

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