Amicus Supporters and Critics Argue Over FTC's 'Click-to-Cancel' Rule
Deceptive negative-option contracts -- where consumers pay monthly for a subscription unless they opt out -- are ballooning, despite regulators' efforts, backers of the FTC's "click-to-cancel" rule told the 8th U.S. Circuit Court of Appeals on Friday. NCTA and others are challenging the rule (see 2411220029). Last week, amicus briefs were filed for both sides in docket 24-3137.
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Consumers and legitimate businesses face "a multibillion-dollar disaster" from deceptive negative-option contracts, Truth in Advertising said Friday. It defended click-to-cancel as "a logical, appropriate, and necessary response to the deluge of unwanted subscriptions." The group called the FTC's approach "neither arbitrary nor capricious [but] supported by substantial evidence" and squarely in the FTC’s mandate to prevent deceptive acts and practices.
Eleven internet and consumer protection professors said negative-option rules are decades-old, and Congress "has regulated in this area without ever casting doubt on those regulations." The Restore Online Shoppers’ Confidence Act of 2010 "specifically ratified the Commission’s regulation of negative-option contracts as to telemarketing." They said arguments that the FTC was beyond its authorization don't grapple with how Congress has repeatedly affirmed the agency’s authority. Signers of that amicus brief included Georgetown law professor David Vladeck and Columbia law, science and technology professor Tim Wu.
The Main Street Alliance said that instead of competing on price or quality, many companies try to trap buyers -- including MSA's small business members -- "in automatic recurring deals they no longer want and may never have asked for in the first place." The petitioners don't dispute that practices identified in the rule occur, that they hurt consumers and small businesses, or that they qualify as unfair and deceptive, MSA said. Instead, the petitioners seek to invalidate the rule "based on a series of tendentious statutory and procedural arguments." The rule is clearly within FTC authority, and the petitioners don't identify procedural failings, it added. In addition, the rule’s requirements are reasonable and reasonably explained.
Backing the petitioner last week in an amicus brief, the International Franchise Association, National Association of Spa Franchises and Health & Fitness Association argued that click-to-cancel was expedited without a preliminary regulatory analysis, which would have considered its significant financial and administrative effects on business. The groups said the FTC "glossed over these compliance burdens and a genuine consideration of reasonable alternatives" when it rushed through the negative-option rule. Owing to that haste, "vague, ambiguous and undefined terms and internal inconsistencies and tensions" became part of the rule, making compliance "challenging," they said.