Federal Appeals Court Strikes Down FTC's 'Click-to-Cancel' Rule Days Before Implementation

 Business groups successfully challenge subscription regulation over procedural deficiencies

Published July 10, 2025

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A federal appeals court dealt a significant blow to consumer advocates Tuesday by striking down the Federal Trade Commission's "click-to-cancel" rule just days before it was scheduled to take effect, handing a victory to business groups that had mounted a sustained legal challenge against the regulation.

The U.S. Court of Appeals for the Eighth Circuit in St. Louis ruled unanimously that the FTC committed "fatal" procedural errors when crafting the rule, which would have required companies to make canceling subscriptions as simple as signing up for them. The regulation was set to be enforced starting July 14.

"While we certainly do not endorse the use of unfair and deceptive practices in negative option marketing," the three-judge panel wrote in a per curiam opinion, "the procedural deficiencies of the Commission's rulemaking process are fatal here."

The court found that the FTC improperly sidestepped a statutory requirement to conduct a preliminary regulatory analysis for rules with an annual economic impact exceeding $100 million. The FTC had argued it wasn't required to prepare such an analysis because its initial estimate fell below the $100 million threshold, even though an administrative law judge later determined the rule would exceed that amount.

Business Coalition Claims Victory

The ruling represents the culmination of a coordinated legal strategy by industry groups and trade associations, which filed challenges in four separate federal circuit courts before the cases were consolidated in the Eighth Circuit. Petitioners included the U.S. Chamber of Commerce, National Federation of Independent Business, Interactive Advertising Bureau, Electronic Security Association, and NCTA—The Internet & Television Association.

"The FTC went far beyond their authority in enacting this rule," said Beth Milito, Vice President and Executive Director of NFIB's Small Business Legal Center. "NFIB is pleased that the Court recognized the procedural failures that took place in the rulemaking process and prevented this burdensome regulation from inflicting further damage on small businesses."

The business groups had argued that the rule was "arbitrary and capricious" under the Administrative Procedure Act and that the FTC exceeded its statutory authority by attempting to regulate consumer contracts across all sectors of the economy.

Rule's Ambitious Scope

The regulation, formally known as the amended Negative Option Rule, would have applied to virtually all subscription-based services, from streaming platforms and gym memberships to software services and meal delivery programs. The FTC estimated the rule would affect more than 1 billion paid subscriptions in the United States.

Under the rule's requirements, companies would have been prohibited from:

• Making cancellation more difficult than the sign-up process
• Misrepresenting material facts about subscription terms
• Failing to obtain clear, informed consent before charging consumers
• Requiring customers to navigate complex cancellation procedures

The rule was part of broader efforts by the FTC under former Chair Lina Khan to crack down on what regulators called "dark patterns"—design features that trick consumers into unwanted subscriptions or make cancellation unnecessarily difficult. In 2024, the FTC said it was receiving an average of 70 complaints a day about subscription cancellation issues.

Political and Legal Implications

The court's decision comes amid broader scrutiny of federal agency rulemaking following the Supreme Court's June 2024 decision in Loper Bright Enterprises v. Raimondo, which eliminated the Chevron doctrine that had given agencies significant deference in interpreting statutes. Recent challenges on similar grounds against FTC rules have found success; in August 2024, the FTC's Non-Compete Rule was set aside and ruled unenforceable nationwide.

The rule's fate had already been uncertain under the Trump administration, which took office in January with a more business-friendly approach to regulation. Current FTC Chair Andrew Ferguson, who replaced Khan, had opposed the rule when it was initially passed on a 3-2 party-line vote in November 2024.

Former FTC Chair Lina Khan blamed the Trump administration for the rule's demise, posting on social media: "The rule was set to go into effect in May but this @FTC slow-walked it -- and now a court has tossed it out, claiming industry didn't get enough of a say."

Industry Impact and Consumer Response

The ruling affects a wide range of industries that rely heavily on subscription revenue models. Streaming services like Netflix, Disney+, and HBO Max, along with fitness chains, software companies, and news publications, had been preparing to comply with the new requirements.

Dotan Hammer, a partner at Pearl Cohen law firm who specializes in data and cyber regulation, said the court ruling means the FTC would have to "go back and repeat most of the rulemaking process" if it decides to reissue the rule. "It's hard to imagine that it can be completed in any less than 4-6 months. Certainly, the court's decision vacating the rule means a delay in the rule's reissuance and enforcement at least into 2026."

Consumer advocacy groups expressed disappointment with the decision. The rule had been designed to address widespread frustration with subscription services that make signing up easy but cancellation deliberately difficult—a practice that has generated thousands of consumer complaints.

Compliance Challenges Remain

While the federal rule has been struck down, businesses still face a complex patchwork of state regulations governing automatic renewals and subscription cancellations. Currently, 20 states and Washington, D.C. have their own automatic renewal laws applying to business-to-consumer and/or business-to-business contracts, with some imposing requirements similar to or more burdensome than the struck-down federal rule.

The FTC declined to comment on the ruling. The agency could potentially appeal the decision to the Supreme Court, though such an appeal would face long odds given the current Court's skeptical view of expansive agency authority.

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Sources and Citations:

1. Watwe, Shweta. "FTC's Click-to-Cancel Rule Vacated by Federal Appeals Court." Bloomberg Law, July 8, 2025. https://news.bloomberglaw.com/litigation/ftcs-click-to-cancel-rule-struck-down-by-federal-appeals-court
2. Harwell, Drew. "U.S. appeals court blocks FTC 'click to cancel' subscription rule." The Washington Post, July 9, 2025. https://www.washingtonpost.com/business/2025/07/09/ftc-us-court-block-click-to-cancel/
3. Owen, Laura Hazard. "Goodbye, 'Click to Cancel': Court strikes down FTC rule that was set to go into effect July 14." Nieman Journalism Lab, July 8, 2025. https://www.niemanlab.org/2025/07/goodbye-click-to-cancel-court-strikes-down-ftc-rule-that-was-set-to-go-into-effect-july-14/
4. Littleton, Cynthia. "FTC 'Click to Cancel' Rule Struck Down by Appeals Court." Variety, July 9, 2025. https://variety.com/2025/digital/news/ftc-click-to-cancel-rule-struck-down-appeals-court-1236451273/
5. "Appeals court strikes down 'click-to-cancel' rule." UPI, July 9, 2025. https://www.upi.com/Top_News/US/2025/07/09/appeals-ruling-FTC-click-to-cancel/9451752046397/
6. "Small Businesses Succeed in Challenge to FTC's Automatic Renewal Rule." National Federation of Independent Business, July 9, 2025. https://www.nfib.com/news/press-release/small-businesses-succeed-in-challenge-to-ftcs-automatic-renewal-rule/
7. Federal Trade Commission. "Federal Trade Commission Announces Final 'Click-to-Cancel' Rule Making It Easier for Consumers to End Recurring Subscriptions and Memberships." FTC Press Release, October 16, 2024. https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring
8. Kornblau, Robin. "Trade Associations Challenge FTC's Final Click-to-Cancel Rule." Bloomberg Law, October 23, 2024. https://news.bloomberglaw.com/litigation/trade-associations-challenge-ftcs-final-click-to-cancel-rule
9. Federal Trade Commission. "Negative Option Rule." Federal Register, November 15, 2024. https://www.federalregister.gov/documents/2024/11/15/2024-25534/negative-option-rule
10. "Appeals court voids FTC's 'click to cancel' rule just before it starts." The Hill, July 8, 2025. https://thehill.com/policy/technology/5390731-appeals-court-voids-ftcs-click-to-cancel-rule-just-before-it-starts/

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