A coalition of industry groups representing cable, internet, home security, and online advertising companies has filed a lawsuit challenging the Federal Trade Commission’s (FTC) new “click to cancel” rule. The lawsuit, filed in the 5th U.S. Circuit Court of Appeals in New Orleans, argues that the rule exceeds the FTC’s authority and lacks sufficient evidence to justify its implementation.
The “click to cancel” rule, finalized by the FTC on October 16th, aims to simplify the process of canceling subscriptions for consumers. It requires companies to make cancellation as easy as signing up, with options like a prominent cancellation button on their websites or apps.
The lawsuit, brought by NCTA – The Internet & Television Association, the Electronic Security Association, and the Interactive Advertising Bureau, claims that the rule is overly broad and places undue burdens on businesses. They argue that the FTC failed to demonstrate a widespread problem with subscription cancellations that warrants such a sweeping regulations according to a report from Reuters.
NCTA represents major players in the cable and internet industry, including Charter Communications, Comcast Corp, and Cox Communications, as well as media giants like Disney Entertainment and Warner Bros. Discovery.
The FTC declined to comment on the lawsuit. However, the agency has previously stated that the rule is necessary to protect consumers from unfair and deceptive practices related to subscriptions and recurring payments.
The 5th Circuit Court of Appeals, known for its conservative leanings, has become a popular venue for businesses challenging government regulations. This case is likely to be closely watched as it could have significant implications for the future of consumer protection in the digital age.
Key Provisions of the “Click to Cancel” Rule:
- Requires companies to obtain clear consent for subscriptions, auto-renewals, and free trials that convert to paid memberships.
- Mandates that the cancellation method be “at least as easy to use” as the sign-up process.
- Prohibits companies from requiring consumers who signed up online to cancel through a chatbot or agent.
- Requires companies to offer cancellation by phone or online for in-person signups.
The outcome of this lawsuit could significantly impact how businesses manage subscriptions and interact with their customers. It remains to be seen whether the 5th Circuit will uphold the FTC’s rule or side with the industry groups challenging its validity.