FTC’s Click-to-Cancel Rule Vacated Ahead of Planned July 14 Effective Date

On July 8, 2025, a three-judge panel of the US Court of Appeals for the Eighth Circuit issued a per curiam opinion vacating the US Federal Trade Commission’s (FTC’s) Negative Option Rule (Click-to-Cancel) on Administrative Procedure Act grounds. As such, the rule will not become effective on July 14, the FTC’s previous effective date.

To issue the rule, the FTC was required to use its formal rulemaking authority provided in Section 18 of the FTC Act (15 USC § 57a). When invoking this statutory rulemaking authority, the FTC must define “with specificity” acts or practices it determines are unfair or deceptive and may only issue proposed rules after it finds the acts or practices at issue are “prevalent.”

The statutory provision also requires the Commission to engage in a preliminary regulatory analysis at the proposal stage and a final regulatory analysis upon issuance of a final rule. The requirements to issue both types of analyses do not apply when the FTC seeks to amend an existing rule unless the FTC estimates that the rule amendment will have an annual effect on the national economy of $100 million or more.

In its opinion, the Eighth Circuit found that the FTC’s rulemaking suffered from a fatal procedural flaw. Despite a finding to the contrary by the administrative law judge assigned to hold informal hearings on the issue of cost, among other issues, the FTC determined the rule amendment would not have an annual effect on the national economy of greater than $100 million and thus bypassed conducting a preliminary regulatory analysis.

The court determined that the FTC’s failure to conduct the preliminary regulatory analysis despite the ALJ’s finding violated Section 18’s procedural requirements and vacated the rule on those grounds. The FTC has not yet signaled any next steps with regard to the Click-to-Cancel Rule, but Andrew Ferguson, the current FTC chair, dissented from the FTC’s decision to adopt the rule on both procedural and substantive grounds in 2024 when he was a commissioner.

For a more detailed background on the Click-to-Cancel Rule, see our previous LawFlash.