Cable companies ask 5th Circuit to block FTC’s click-to-cancel rule

Cable companies, advertising firms, and newspapers are asking courts to block a federal "click-to-cancel" rule that would force businesses to make it easier for consumers to cancel services. Lawsuits were filed yesterday, about a week after the Federal Trade Commission approved a rule that "requires sellers to provide consumers with simple cancellation mechanisms to immediately halt all recurring charges." Cable lobby group NCTA-The Internet & Television Association and the Interactive Advertising Bureau trade group sued the FTC in the conservative US Court of Appeals for the 5th Circuit. The lawsuit claims the 5th Circuit is a proper venue because a third plaintiff, the Electronic Security Association, has its principal offices in Dallas. That group represents security companies such as ADT. A separate lawsuit was filed against the FTC in the 6th Circuit appeals court by the Michigan Press Association and National Federation of Independent Business. The two lawsuits were apparently coordinated as they both complain about the rule with the following text:

The Final Rule is an attempt to regulate consumer contracts for all companies in all industries and across all sectors of the economy in which the customer purchases a service or subscription that will continue unless the customer exercises the option to cancel. The Final Rule calls these "negative option" contracts—estimated as covering over a billion paid subscriptions in the United States—and deems them all to be deceptive unless they comply with onerous new regulatory obligations regarding disclosures, how those disclosures are communicated, a "separate" consent requirement, regulations of truthful company representative communications with customers, and prescriptive mandates for service cancellation, among others.

The lawsuits say the FTC order was "arbitrary, capricious, and an abuse of discretion within the meaning of the Administrative Procedure Act," that it was unsupported by substantial evidence, and exceeds the FTC's statutory authority in violation of the US Constitution. The 5th Circuit is generally regarded as the nation's most conservative, but the 6th Circuit also has a majority of judges appointed by Republican presidents. When identical lawsuits are filed in multiple circuits, the Judicial Panel on Multidistrict Litigation randomly selects a court to handle the case.                                                                       The FTC declined to comment on the lawsuits today. The agency's rule is not enforced yet, as it is scheduled to take full effect 180 days after publication in the Federal Register.

Cable firms don’t want canceling to be easy

The NCTA cable lobby group, which represents companies like Comcast and Charter, have complained about the rule's impact on their ability to talk customers out of canceling. NCTA CEO Michael Powell claimed during a January 2024 hearing that "a consumer may easily misunderstand the consequences of canceling and it may be imperative that they learn about better options" and that the rule's disclosure and consent requirements raise "First Amendment issues." The Interactive Advertising Bureau argued at the same hearing that the rule would "restrict innovation without any corresponding benefit" and "constrain companies from being able to adapt their offerings to the needs of their customers." The FTC held firm, adopting its proposed rule without major changes. In addition to the click-to-cancel provision, the FTC set out other requirements for "negative option" features in which a consumer's silence or failure to take action to reject or cancel an agreement is interpreted by the seller as acceptance of an offer. The FTC said its rule "prohibits misrepresentations of any material fact made while marketing using negative option features; requires sellers to provide important information prior to obtaining consumers' billing information and charging consumers; [and] requires sellers to obtain consumers' unambiguously affirmative consent to the negative option feature prior to charging them." The FTC will have to defend its authority to issue the rule in court. The agency decision cites authority under Section 18 of the FTC Act to make "rules that define with specificity acts or practices that are unfair or deceptive" and "prescribe requirements for the purpose of preventing these unfair or deceptive acts and practices." "Too often, businesses make people jump through endless hoops just to cancel a subscription," FTC Chair Lina Khan said. "The FTC's rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want."