A recent decision by an Eighth Circuit panel on July 22nd has vacated the Federal Trade Commission’s (FTC) planned “click-to-cancel” rule. This determination will have a direct impact on consumer protection regulations relevant to the ecommerce industry.

The “click-to-cancel” rule: The FTC’s proposed rule would have mandated that companies allow customers to cancel their subscriptions with a single click. While often framed as a consumer protection measure, such broad mandates can introduce significant operational complexities and costs for legitimate businesses, potentially stifling innovation without effectively addressing core issues.

Why the rule was struck down: The Eighth Circuit panel found that the FTC did not follow the proper procedures. This critical procedural misstep occurred after an administrative law judge determined that implementing this new rule would cost businesses over $100 million. The Eighth Circuit concluded that once this determination was made by the administrative law judge, the FTC was required to undertake further analysis regarding the impact the proposed rule would have on businesses before moving forward with adoption of the final rules.  By failing to do so, the FTC acted in violation of the Administrative Procedures Act, which requires the rule to be set aside.

The Impact on ecommerce Businesses: This decision represents a positive outcome for the ecommerce industry, particularly for those operating subscription-based models. By vacating this rule, the Eighth Circuit has:

• Prevented immediate compliance burdens: Ecommerce businesses are spared the significant financial and operational overhaul that would have been required to implement a single-click cancellation system, especially one estimated to cost over $100 million industry-wide.
• Reaffirmed the need for proper regulatory procedure: The ruling underscores that agencies like the FTC must follow established protocols and consider the economic impact of their proposed rules.
• Provided a moment of relief and stability: In an ever-evolving regulatory landscape, this offers a period of predictability, allowing businesses to focus on growth and innovation rather than immediate, costly compliance shifts.

This ruling aligns with our core mission and advocacy efforts at the Ecommerce Innovation Alliance (EIA) to ensure a fair balance between consumer protection and the operational realities of ecommerce businesses. The EIA is committed to keeping you informed about crucial developments in consumer protection, data privacy, and other evolving areas. By staying engaged and informed, we collectively strengthen our industry.

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