Eighth Circuit Vacates FTC’s Click-to-Cancel Rule: What Compliance Teams Need to Know

According to an article by Dickinson Wright, the Eighth Circuit’s recent decision in Custom Communications, Inc. v. FTC has vacated the Federal Trade Commission’s 2024 Negative Option Rule, popularly known as the “Click-to-Cancel” rule, due to procedural missteps. Specifically, the FTC failed to conduct a required regulatory analysis under Section 22 of the FTC Act after realizing the rule would impose over $100 million in annual costs.

The FTC’s Click to Cancel rule was a 2024 amendment to the Negative Option Rule requiring businesses to make it as easy for consumers to cancel a subscription or recurring charge online as it was to sign up, typically through a clear and simple cancellation mechanism like a “click-to-cancel” button. It aimed to prevent unfair or deceptive practices by mandating transparency, easy cancellation, and clear disclosures for automatically renewing services.

As a result, the court applied both the FTC Act and the Administrative Procedure Act to invalidate the rule nationwide. This decision is unaffected by the Supreme Court’s recent narrowing of universal injunction powers, as Section 18(e)(3) of the FTC Act explicitly permits courts to “set aside” a rule in its entirety.

Despite the federal rollback, businesses remain subject to strict state-level cancellation laws in jurisdictions like California, New York, and Colorado. Moreover, the FTC’s pre-1973 negative option rule, governing mail and telephone orders, remains in effect. The Commission also retains its Section 5 authority to challenge unfair or deceptive negative-option practices, and recent Supreme Court precedent (e.g., Loper Bright) eliminates Chevron deference, raising the bar for FTC rulemaking clarity.

For compliance teams, the takeaway is nuanced: while the 2024 “Click-to-Cancel” rule is vacated, consumer cancellation requirements persist through state laws and legacy FTC authority. Businesses should preserve records of cancellation flows and align them with applicable state statutes. Contract terms built around the vacated rule can remain as best practices or be restructured for flexibility in the event of a regulatory comeback.