Click-to-Cancel
October 31, 2024
Privacy Plus+
Privacy, Technology and Perspective
This week, let’s look at the controversy surrounding the new “Click-to-Cancel” rule, issued this month in final form by the Federal Trade Commission (FTC).
Background:
Section 5 of the FTC Act authorizes the FTC to act against “unfair or deceptive acts or practices.” Section 18 permits the FTC to issue “rules that define with specificity acts or practices that are unfair or deceptive” and “prescribe requirements for the purpose of preventing these unfair or deceptive acts and practices.”
Over many years, the FTC has identified many common sales tricks as “unfair or deceptive acts or practices” and has issued regulations to control them. A few examples include:
+ the “Cooling Off Rule,” which gives consumers who have succumbed to pressure from door-to-door salespeople three days in which to cancel the transaction free of charge;
+ the “Negative Option Rule,” which prohibits businesses from sending unsolicited merchandise to consumers and then requiring them to take specific action (like contacting the sender) to avoid being charged for it, effectively treating the consumer's silence or inaction as consent to purchase;
+ and the popular “Do Not Call List.”
+ Add to these brief examples, now, the “Click-to-Cancel Rule.”
The Click-to-Cancel Rule:
Perhaps you’ve tried to cancel a gym membership, or a subscription, or some other recurring charge. All too often, it seems to be a lot harder to cancel than it was to sign up, sometimes requiring jumping through one hoop after another -- at least that seems to have been the experience of some 16,000 people who commented on that very subject to the FTC.
Earlier this month, the FTC finalized and issued its rule, requiring companies who bill regularly for a recurring product or service to provide consumers with “simple cancellation mechanisms,” in effect making it as easy for a customer to cancel as it was to sign up.
You can read the FTC’s press release announcing the rule by clicking here:
Immediate Litigation:
Litigation ensued almost as soon as the Final Click-to-Cancel Rule was announced – brought, predictably, by lobbying groups for the internet, television and interactive advertising trade groups, in (also predictably) the conservative Fifth Circuit. Separately, but evidently in coordination with each other, trade associations for the Michigan Press Association and the National Federation of Independent Businesses also sued the FTC, in the Sixth Circuit. Like most suits to overturn regulations, the suits claim the Click-to-Cancel Rule is “arbitrary, capricious, and an abuse of discretion under the meaning of the Administrative Procedures Act,” is unsupported by substantial evidence, and exceeds the FTC’s statutory authority.
Our Thoughts:
The FTC has become a lightning rod of controversy in today’s “culture wars,” as businesses and consumers struggle over what should be regulated, how tightly, on whose behalf, and for whose ultimate benefit. Faux outrage and emotional handwringing often obscure legitimate questions: Should FTC regulation protect the most naïve, incredulous, disadvantaged, and uninformed (see Charles of the Ritz, ca. 1944), or “just” the reasonable person (see In re Cliffdale, ca. 1983)? Should the same Rule address businesses who only “make it a little harder to cancel,” as well as those who go out of their way to make it nearly impossible? What about businesses who incur up-front expense to onboard a new customer and need several payments to recoup the initial cost?
At the “top level,” we see ourselves as reasonable people, neither especially vulnerable nor invincible – but, if truth be told, a little time-and focus-starved now and then, given the pace and distractions of daily life. So we also see the FTC’s actions as a valuable and helpful, taking small burdens off of consumers, by requiring companies to smooth out their pathways of business so we don’t have to. We generally support the Click-to-Cancel Rule, and the rest.
We sense that this type of time-, focus-, and attention-saving “consumer protection” is increasingly popular in many contexts. For instance, many privacy laws require easy, click-through rejections of cookies, permissions, and so on. Others require that approvals be at least as easy to refuse, reject, or cancel as they are to approve. Many require plain, simple statements and tables of contents with click-through provisions.
If you’ve ever tried to get out of a gym membership, perhaps you feel that way, too.
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Hosch & Morris, PLLC is a boutique law firm dedicated to data privacy and protection, cybersecurity, the Internet and technology. Open the Future℠.