In a major blow to federal subscription regulations, the Eighth Circuit Court of Appeals has vacated the FTC’s recently finalized Click-to-Cancel rule, concluding that the Commission failed to follow required procedures under the Federal Trade Commission Act. The ruling, issued today, halts enforcement of the rule just days before its scheduled July 14 compliance deadline.

The court sided with petitioners—including the U.S. Chamber of Commerce, NCTA, and the National Federation of Independent Business—who argued the FTC skipped a key step: issuing a preliminary regulatory analysis once the rule’s economic impact was found to exceed $100 million annually.

The FTC had originally estimated the rule’s effect would fall below that threshold, but an administrative law judge determined otherwise during the rulemaking process. Instead of issuing a supplemental notice and the required economic analysis, the Commission proceeded directly to a final rule.

“The Commission’s interpretation allows it to sidestep the requirement… by simply not publishing a preliminary analysis and cutting off the ability of regulated parties to respond,” the court stated.

About the Rule

Finalized in November 2024, the FTC’s Negative Option Rule—commonly known as the Click-to-Cancel rule—was designed to standardize subscription practices across all industries and marketing channels. It would have required businesses to:

• Provide a cancellation method at least as easy as sign-up

• Disclose all material terms “immediately adjacent” to the opt-in

• Obtain unambiguous, standalone consent for recurring charges

• Avoid misrepresentation of material facts about subscriptions

The rule expanded the FTC’s original 1973 negative option rule and applied to everything from free-to-paid trials and continuity plans to automatically renewing subscriptions.

The Court’s Reasoning

The court’s decision does not take issue with the FTC’s intent to prevent deceptive subscription practices, but it faulted the agency’s process. Specifically, the FTC Act requires a preliminary regulatory analysis for rules with significant economic impact. This analysis must explore alternative options and assess cost-benefit tradeoffs before a final rule is issued.

Because the FTC failed to issue this analysis—even after its own ALJ found that compliance would easily exceed the $100 million threshold—the court ruled the agency’s action procedurally invalid.

“Furnishing an initially unrealistically low estimate… would avail the Commission of a procedural shortcut,” the judges warned. “Excusing the Commission’s noncompliance… could open the door to future manipulation of the rulemaking process.”

Given this procedural violation and the resulting harm to affected industries, the court vacated the rule in full. It declined to limit its decision to the petitioning parties or to sever specific provisions.

INSIDER TAKE

• For subscription businesses, this decision lifts an immediate regulatory burden but creates uncertainty. While the Click-to-Cancel rule is vacated, state-level laws (such as California’s AB 2863) remain in force, and the FTC may return with a revised rulemaking effort.

• For the FTC, this is a procedural—not substantive—loss. The court did not rule on whether the rule exceeded the agency’s legal authority. The FTC could restart the process, but that would take significant time and political capital.

• What to Watch: Will the FTC reissue a notice of proposed rulemaking, this time with the required economic analysis? And will Congress step in to clarify or codify national cancellation standards?

• Takeaway for compliance teams: Don’t roll back Click-to-Cancel changes just yet. The regulatory landscape remains fragmented, and the FTC has not lost its enforcement power under existing laws like ROSCA or the FTC Act’s general prohibition on unfair practices.

NEXT STEPS

Subscription Insider has reached out to legal expert Marc Roth, Partner at Cobalt Law and a leading authority on FTC compliance, for his expert take on what this decision means for subscription businesses. We’ll publish a full analysis as soon as it’s available—including what the ruling does and doesn’t change, how to assess your current practices, and whether a revised rulemaking is likely.

Stay tuned for a detailed breakdown and actionable guidance in the coming days.