The trade group representing the U.S.’s largest cable operators and programmers is among three associations that sued the FTC, seeking to block the agency’s newly adopted “click-to-cancel” rule — which is designed to let consumers more easily cut the cord on subscriptions.
NCTA – The Internet & Television Association, joined by the Electronic Security Association, representing companies in the electronic life safety and security industry, and the Interactive Advertising Bureau, filed the lawsuit Oct. 22 in the 5th Circuit Court of Appeals. The suit seeks an order vacating the FTC’s click-to-cancel rule.
The groups argue that the FTC’s order issuing the click-to-cancel final rule “is arbitrary, capricious and an abuse of discretion within the meaning of the Administrative Procedure Act, 5 U.S.C. § 701, et seq.” and that it is “unsupported by substantial evidence,” according to the complaint. The lawsuit also asserts the FTC acted beyond its statutory authority, in violation of the U.S. Constitution.
“Petitioners respectfully request that this Court hold unlawful, vacate, enjoin, and set aside the Final Rule and provide such additional relief as may be appropriate,” the NCTA, ESA and IAB said in the suit.
An FTC rep declined to comment on the lawsuit. A copy of the complaint is available at this link (via the Policyband newsletter).
On Oct. 16, the FTC announced a final “click-to-cancel” rule that requires sellers “to make it as easy for consumers to cancel their enrollment as it was to sign up.” Most of the final rule’s provisions are set to go into effect 180 days after it is published in the Federal Register. The FTC published a fact sheet on the new rule available at this link.
The FTC said the updated rule will apply to “almost all negative option programs in any media.” Such “negative option” contracts cover over 1 billion paid subscriptions in the U.S. According to the agency, “negative option marketing” offers come in a variety of forms but “all share a central feature: each contain a term or condition that allows a seller to interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer.”
According to the trade groups’ lawsuit, the FTC click-to-cancel rule deems all “negative option” offers “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.”
NCTA members include Comcast/NBCUniversal, Charter Communications, Cox Communications, Disney, Paramount Global, Sony Pictures Entertainment and Warner Bros. Discovery. Members of the ESA include ADT.
The FTC click-to-cancel rule prohibits sellers from “misrepresenting any material facts while using negative option marketing; require sellers to provide important information before obtaining consumers’ billing information and charging them; and require sellers to get consumers’ informed consent to the negative option features before charging them,” according to the FTC.
The FTC said the new rule is intended to modernize its 1973 Negative Option Rule “to combat unfair or deceptive practices related to subscriptions, memberships and other recurring-payment programs in an increasingly digital economy where it’s easier than ever for businesses to sign up consumers for their products and services.”
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” FTC Chair Lina Khan said in announcing the click-to-cancel rule last week. “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.”
