If you want to sign up for a gym membership, you can make one click on its website and pay. But for many gyms, if you want to cancel, you have to go to the gym in person and find the right manager, or mail a form with a specific ask, or any of numerous other steps. The point is to make getting out of a subscription much harder than getting into it, so you’ll give up and keep paying every month.
Lina Khan’s Federal Trade Commission reasonably suggested that canceling subscriptions should be as easy as signing up. They issued a rule called “click to cancel” with that goal in mind. It was supposed to go into effect next week. But the Eighth Circuit Court of Appeals put a stop to it, by ruling that if the FTC wanted to write a rule stopping people from having to go to the gym in person, it had to, rhetorically speaking, go to the gym in person.
In other words, onerous cancellation policies were preserved because of onerous administrative policies. And if we’re really thinking about making governance easier, the procedures executive branch agencies must endure to regulate the economy, which courts have interpreted for the benefit of big business, should top the list.
The click-to-cancel rule was challenged by just about every industry that targets potential customers with subscriptions: broadband, cable, newspapers, home security, insurance, gyms and fitness, and online advertisers (who promote the special offers that trap people in subscriptions). The National Federation of Independent Business and the U.S. Chamber of Commerce got involved too, in case any company offering subscriptions was left out.
This wide array of corporations that have virtually unlimited budgets for lobbying and influencing policy made the argument to the Eighth Circuit that they weren’t given enough of a chance to be heard. Seriously.
GETTING AGENCY RULEMAKING PASSED involves a series of steps laid out in the Administrative Procedure Act of 1946. Some steps are specific to agencies like the FTC based on subsequent statutes. As it’s been standardized over the years, the agency must first issue an Advance Notice of Proposed Rulemaking (ANPRM). After the Notice of Proposed Rulemaking (NPRM), the FTC must give stakeholders an informal hearing with a preliminary regulatory analysis that describes alternatives to the rule, the projected benefits and costs of each, and the expected effectiveness. After a notice and comment period, where anyone can offer their views on the rule, a final rule must be accompanied with a final regulatory analysis that has an explanation of the path the agency took, along with a summary of all the comments submitted about the preliminary analysis. I’ve broken out in hives just writing that paragraph; this is why rulemaking takes years.
In the case of click-to-cancel, the ANPRM was issued in 2019, during the first Trump administration. The FTC was looking to update the “negative option rule” that governs subscription services but hadn’t been updated since 1973, when there was no internet and it only applied to things like mail-order book-of-the-month clubs. The Commission specifically said it would look at plans with “automatic renewal” procedures or offers promising a free trial that convert to a charge later.
There were only 17 comments on the ANPRM; if industry was alarmed, they sure didn’t show it. Then Joe Biden’s FTC, under Khan’s direction, released a policy statement in late 2021, and the NPRM in April 2023. According to the procedures, if the Commission is amending a rule, as they were doing here with the negative option rule of 1973, and if the compliance cost is estimated under $100 million across the economy, then the FTC doesn’t have to issue a preliminary regulatory analysis.
The click-to-cancel rule was challenged by just about every industry that targets potential customers with subscriptions.
The FTC made that determination, and it’s completely reasonable. Every business already has a set of rules for how and when consent is given for a subscription and how it can be canceled. If the rule is just to change those policies to make them one-click, the businesses’ compliance burden is very low. The burden of devising options to get around the rules and maintain ill-gotten profits by tricking people is very high, but that’s not the FTC’s problem.
Then the FTC held an informal hearing in winter 2024, as prescribed by law. Industry of course whined that the compliance burden was huge, and an administrative law judge at the hearing agreed with them. That could have triggered a preliminary regulatory analysis, though the FTC argued that it was not required by statute. The Commission went ahead and issued the final rule in November 2024.
Keep in mind that the NPRM included things that would be in a preliminary regulatory analysis, including alternative regulatory options and an analysis of record-keeping and compliance costs. Then the FTC sought notice and comment, as per standard procedure, and received 17,000 comments, most of them overwhelmingly positive. The final regulatory analysis, issued with the final rule, included a cost-benefit analysis showing the benefits to consumers to be seven times greater than even the highest assessment of the costs.
The industries at issue had more than five years to issue comments, participate in hearings, offer alternatives, and make their position known, all of which they did. But because this one slip of paper with a preliminary analysis wasn’t issued, they sued to throw away the whole rule.
Trump’s Republican FTC commissioners, who voted against the click-to-cancel final rule last year, when they were still in the minority on the Commission, assisted the industry lawsuit by delaying the effective date from May 14 to July 14, giving time for the Eighth Circuit to rule. They did so despite suing Uber in April over “deceiv[ing] consumers about their subscriptions” and “ma[king] it unreasonably difficult for customers to cancel,” precisely the conduct at issue in the click-to-cancel rule. (An agency rule could force a civil penalty beyond the level of the gains from the misconduct; the Uber enforcement action could not do that.)
The Eighth Circuit’s three-judge panel, two appointed by Donald Trump and one by George H.W. Bush, decided that the statutory language did require the FTC to issue the preliminary regulatory analysis, even if it came well after the NPRM.
The FTC noted that not filing the analysis was a “harmless error,” something noted directly in the Administrative Procedure Act as grounds enabling regulatory agencies to proceed, so courts would not become “impregnable citadels of technicality,” as a 2009 Supreme Court case put it. But the Eighth Circuit decided to be an impregnable citadel of technicality, saying that not having the preliminary analysis caused grievous harm to the plaintiffs—those giant corporations that had five years to contest the click-to-cancel rule. They made this determination in part because the Republican commissioners’ dissent showed that the vote was “closely divided.”
The Fifth Circuit came to a similar conclusion earlier this year in killing the FTC’s auto dealer rule that would have prevented the persistent deceptive tactics that go into selling a car. The Dodd-Frank Act allowed rules on consumer financial transactions to be promulgated without an ANPRM. But the court ruled that the FTC wasn’t allowed to do that because of where it derived its authority to issue rules on auto dealers. So even though auto dealers had the opportunity in the NPRM and public comment to oppose the rule, the Fifth Circuit claimed they didn’t have enough time to oppose.
“We certainly do not endorse the use of unfair and deceptive practices in negative option marketing,” the Eighth Circuit judges said in their conclusion. But they threw out the entire rule anyway, because of this alleged failure to give marketers more opportunities to lobby and weaken actions damaging to their bottom line.
Though the Supreme Court just ended the ability of federal judges (other than the Supremes themselves) to impose nationwide injunctions, they left open this back door to “set aside” rules that judges believe to have violated the APA. That’s what was done here. And the judges effectively said that if federal agencies want to make it so that people don’t have to take countless difficult steps to get out of a subscription, those agencies have to take countless difficult steps.
THERE ARE A FEW LESSONS HERE. The FTC could have gone back and issued a preliminary regulatory analysis. But that probably would not have stopped the assault on the rule. In the current environment, big business gets multiple swings at any regulation, and the Administrative Procedure Act serves as a minefield to destroy such policies and keep consumers at risk. The problem is not so much that the Eighth Circuit erred; rather, it’s that the APA has vested them with unlimited discretion to find any deviation from the APA as an excuse to deep-six what by their own admission are badly needed rules. Public sentiment, as evidenced by the 16,000 comments that weren’t even mentioned in this case, plays no role at all in these debates.
Some Democrats have decided that government has been restricted from persistent action by procedural hurdles that have impoverished the public and turned the U.S. into a dysfunctional state. They blame Democrats and their 1970s proceduralism for this paralysis. Even setting aside the fact that the hyperventilating about well-intentioned liberals killing their own ideas with procedural niceties is wildly overstated, it’s actually this 1946 law, passed in the shadow of the New Deal’s bold and persistent action, that is one of the greatest hindrances to effective government. And it’s particularly problematic because of how it affords corporations a panoply of tools to stop anything affecting their businesses from happening.
In the short term, the FTC could simply reissue the rule, and take the arduous steps to finalize it. I don’t see that happening, given Republican opposition to the rule and the effective end of consumer protection under Trump. But in the longer term, if you care about government working in the interests of the public, the Administrative Procedure Act has to be a target. If the government wants to make it easy to end a subscription, it shouldn’t be so damn hard to do so. We need click-to-cancel, only, in this case, for government.
NOTE: An earlier version of this story attributed procedures to the Administrative Procedure Act that are actually enhanced statutory procedures that must be followed by the FTC. The story has been updated to reflect this.