The Federal Trade Commission (FTC) in the United States has proposed a formal ban on subscriptions that are easy to start but hard to cancel. The FTC announced a notice of proposed rulemaking it dubs “click to cancel,” which would require companies to make ending a subscription just as easy as signing up for one. This means that businesses cannot let someone sign up for a service online but make them call a phone number to cancel. The proposed rule has other provisions as well. For instance, companies that try to keep subscribers by offering special deals or perks must offer an up-front opt-out that lets customers bypass sales pitches. They also have to annually remind consumers that they’re enrolled in “negative option” programs, or programs where failing to cancel something is considered an agreement to keep paying, for anything but physical goods.
The agency has opened a public comment period for the proposal, after which it will potentially make revisions and pass the final regulation. The FTC’s goal is to ensure that companies cannot manipulate consumers into paying for subscriptions that they don’t want. The agency has received countless complaints about this issue. The proposed ban will not apply to non-commercial services like recurring political donations, which have also left some donors feeling scammed and tricked.
Under bans on unfair or deceptive business practices, the FTC already considered what some critics dub “roach motel” practices unlawful. Under Chair Lina Khan, the agency has also gone after companies employing “dark patterns” – a blanket term for interfaces that deceive or manipulate people. Last year, it settled a $100 million lawsuit with telecom provider Vonage, which the FTC alleged created an artificially difficult cancellation process to lock people into subscriptions.
However, a formal ban sets a codified standard for what’s unlawful and gives the FTC more flexibility to demand restitution from companies that break the rule. The agency can recover around $50,000 per individual violation of a consumer’s rights, and consumer lawsuits can recover damages for lost funds and potentially wasted time. Formal standards are increasingly relevant as more and more companies push ongoing service models over ownership. Khan says, “We’ve seen over the last few years in particular a shift that companies are making more and more to subscription models. That shift to greater subscriptions has created more opportunity for mischief.”
The proposed ban will likely affect popular services like Amazon Prime, which had to simplify its cancellation process last year in the EU under regulatory pressure. It’s also been a persistent problem for people who start paying for subscriptions to services like The New York Times, gym memberships, and cable services, among others. The FTC believes that companies should not be able to make it difficult for subscribers to cancel a subscription that they no longer want.