FTC’s New “Click To Cancel” Rule Is Here, But Will It Survive Judicial Challenge?

Andrew Lustigman, Chair of Olshan's Advertising, Marketing & Promotions Group and Co-Chair of the firm’s Brand Management & Protection Group, and associate Morgan Spina published an article in New York Law Journal entitled “FTC's New 'Click To Cancel' Rule Is Here, But Will It Survive Judicial Challenge?.” In the article, Andy and Morgan discuss how automatic renewals for services—or “negative options”—continue to face amended laws. However, this has resulted in a patchwork of various regulations at the state and federal level, making absolute compliance a difficult proposition for companies. “In a purported effort to provide clarity to companies regarding their compliance obligations in this space,” they write, “the Federal Trade Commission (‘FTC’) recently finalized its Rule Concerning Recurring Subscriptions and Other Negative Option Programs (the ‘Final Rule’). Regardless of the pending challenges, the promulgation of the Final Rule is a significant update for sellers and consumers who participate in automatic renewal programs, and it is vital for sellers to take note of the requirements and move toward compliance.” Sellers are required to make certain disclosures to consumers and obtain the consumer’s express informed consent to the negative option feature. Sellers must disclose to the consumer all material terms of the transaction, including that consumers will be charged for the good or service, that charges will increase after any applicable trial period and that charges will be made on a recurring basis unless the consumer cancels. “Affected businesses should certainly monitor the progression of these lawsuits as the Final Rule moves toward the effective dates,” Andy and Morgan explain. “Ultimately, companies engaged in such automatic renewal practices should take proactive steps now to bring their enrollment, consent, and cancellation practices into compliance with the Final Rule requirements.”