FTC's New 'Click To Cancel' Rule Is Here, But Will It Survive Judicial Challenge?
Businesses that haven't adjusted click-to-cancel procedures face legal consequences. Andrew Lustigman and Morgan Spina discuss the impact on various industries, from subscription services to telemarketing companies and the legal compliance obligations associated with continuity programs.
November 04, 2024 at 11:00 AM
9 minute read
Automatic renewals have become a preferred method of goods and service delivery for many businesses, particularly in the context of e-commerce. The ever-changing landscape of federal and state laws regulating negative options and automatic renewals has been widely documented.
Each month, new and amended state laws are proposed, introduced, and oftentimes passed. Overlaying the state laws, there are existing federal laws and regulations that govern negative options. This has resulted in a patchwork of state and federal laws and regulations, making absolute compliance a difficult proposition for many companies.
In a purported effort to provide clarity to companies regarding their compliance obligations in this space, the Federal Trade Commission (FTC) recently finalized its Rule Concerning Recurring Subscriptions and Other Negative Option Programs (the "Final Rule"). While the Final Rule has reached the last stage of the FTC's rulemaking process, questions do remain. In particular, the Final Rule is facing multiple legal challenges from a number of industry groups who assert that the Final Rule is arbitrary and an abuse of the FTC's discretion. 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.
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