A federal appeals court dealt a blow to consumer protection efforts on Tuesday, ruling that subscription services will not be required to make it easier for consumers to cancel their plans.

This “click-to-cancel” policy, a Federal Trade Commission rule, was set to take effect next Monday. This regulation would require every subscription service, from Spotify to gym memberships, to allow subscribers to cancel recurring payments as easily as they signed up.

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In October 2024, the FTC unveiled the rule, saying it would end subscription services’ “tricks and traps” to save Americans’ time and money.

Following the announcement, though, subscription industry groups sought to block the ruling in court. 

Groups that benefit from subscription revenue filed a lawsuit against the FTC the same week as the rule’s announcement, arguing that the commission was improperly aiming to “regulate consumer contracts for all companies in all industries and across all sectors of the economy.”

With the blockage of the “click-to-cancel” rule, what does this mean for subscribers and subscription services? Here’s everything to know:

What was the original ‘click-to-cancel’ rule?

The proposed rule was developed after public comment and was expected to go into effect 180 days after its publication in the Federal Register.

This rule was a part of the former Biden administration FTC’s “Time is Money” initiative, which was billed as cracking down on consumer-related hassles. The original ruling was passed in a 3-2 ruling, with the two GOP FTC members voting against it. 

Former Democratic Chairwoman Lina Khan argued that businesses “make people jump through endless hoops just to cancel a subscription,” and consumers are “stuck paying for a service they no longer want.”

The “click-to-cancel” rule would have required sellers to provide consumers with key information before getting their billing information and charging them. Businesses would also have to get consent from subscribers for subscriptions, auto-renewals, and free trials that convert to paid memberships.

Consumer groups applauded the new rule for protecting customers from paying for services they no longer want, or are unaware they are paying for. The FTC received an average of 70 complaints relating to unwanted subscriptions per day in 2024, according to the committee.

However, the rule’s announcement brought political and legal challenges to the FTC. Business groups such as the U.S. Chamber of Commerce, which sued the FTC over the rule, argued that it exceeded the commission’s statutory authority. The chamber said it would “unfairly saddle businesses with high costs and unnecessary regulatory hurdles.”

The rule was set to take effect in March and then May, but the FTC delayed it until mid-July, leading to the rule being blocked altogether.

Why did the court shut it down?

In a unanimous decision by a three-judge panel for the Eighth Circuit, the court found that Khan’s FTC made serious errors in how it implemented the rule. 

“While we certainly do not endorse the use of unfair and deceptive practices in negative option marketing, the procedural deficiencies of the Commission’s rule-making process are fatal here,” the court wrote. 

Even though parts of the rule were technically salvageable, erasing the entire rule is appropriate “because of the prejudice suffered by Petitioners as a result of the Commission’s procedural error,” it continued. 

In the ruling, the Eighth Circuit found that the FTC skipped a multitude of steps to issue the rule, including depriving stakeholders of “a notable opportunity to dissuade the FTC from adopting the Rule as proposed.” The court noted that the FTC’s decision to skip some analysis was not made in “bad faith,” but found that the petitioners raised enough uncertainty in whether public comments could have influenced the final decision if they were properly reviewed or considered.

These forms of analysis are required for rules with an annual impact on the U.S. economy of more than $100 million. 

In its verdict, the court referenced the two Republican members who voted no on the rule: now-Chairman Andrew Ferguson and Commissioner Melissa Holyok. Previously, Holyok said the rule was a part of the “race to cross the finish line,” as it was voted on and announced less than a month before the 2024 presidential election. She also called it “a missed opportunity to make useful amendments to the preexisting negative option rule within the scope of the Commission’s authority.”

What does this mean for subscriptions now?

The Democrats who voted for the rule in October are no longer members of the FTC, which now has three Republican members.

As a result, the future of proposing the federal rule again isn’t clear.

Other federal rules exist to protect consumers, such as the “Negative Option Rule.” This addresses pre-notification plans for continuous service subscriptions, automatic renewals, free trial periods, and membership clubs, but does not include provisions to make it easier to unsubscribe.

Some states, including California, Colorado, Delaware, Vermont, and Illinois, have laws to protect state citizens against harder-to-navigate subscriptions.

For example, California’s automatic renewal law requires companies offering a subscription that lasts one year or a free trial period exceeding 31 days to give the consumer notice before renewal.

Subscribers will now have to pay closer attention to their subscription and the logistics behind each subscription, including its free-trial timeline and actual costs.

Consumers are still able to file claims to the FTC to fight against unauthorized renewals.

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To further consumer protection, the FTC is moving forward with its preparations for a trial involving Amazon Prime that was introduced in 2023. The popular subscription service allegedly enrolled consumers into its Prime program “without their consent, while knowingly making it difficult for consumers to cancel their subscriptions to Prime,” the commission said.

The trial is expected to take place next year.