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New FTC subscription cancellation rule under fire from business groups

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New FTC subscription cancellation rule under fire from business groups

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Streaming services and other businesses are suing to block a new rule that would make it easier to cancel subscriptions and memberships.

NCTA – The Internet & Television Association, which represents major cable and internet providers such as Charter Communications and Comcast, as well as media companies such as Disney, and other trade groups say the Federal Trade Commission overstepped its authority with the “click to cancel” rule.

The complaint filed in the 5th U.S. Circuit Court of Appeals alleges the new rule could cover as many as 1 billion paid subscriptions in the United States and is “arbitrary, capricious, and an abuse of discretion.”

The Interactive Advertising Bureau, which represents the online advertising industry, and the Electronic Security Association, which represents the home security industry, are also behind the lawsuit. 

The FTC declined to comment.

Under the rule, which passed Oct. 16, businesses must get consent for subscriptions, auto-renewals and free trials that convert to paid memberships. Canceling the services has to be “at least as easy” as signing up, the FTC said.

‘Click to cancel’ rule: FTC wants to solve subscription headache

The FTC rule is part of President Joe Biden’s efforts to crack down on “junk fees.” Vice President Kamala Harris, the Democratic nominee for the White House, talked up the proposed “click to cancel” rule in September.

The rule passed 3-2, with the FTC’s two Republican commissioners voting against it.

While some subscriptions can be canceled with a couple of clicks or a phone call, when companies make it difficult to cancel a subscription, customers can end up with monthly charges long after they no longer want or need a product or service.

Complaints about the difficulty of dropping subscriptions have jumped in recent years. The FTC estimates it receives nearly 70 a day on average.

Trade groups representing advertisers, news publishers, retailers and other industries argue that a multistep cancellation process protects consumers or lets them take advantage of a better deal. They say the new FTC rule places too many burdens on businesses and is unnecessary.

“We’re not sure why some companies would consider it a burden to be transparent with potential customers about prices and terms and to honor requests to cancel when someone doesn’t want to be your customer any more,” Teresa Murray, consumer watchdog director at Public Interest Research Group, told USA TODAY. “Clearly many companies have relied on tricks and traps to get customers and keep them.”

Murray noted that some companies have already voluntarily complied with the new FTC rule by providing upfront pricing and making it as easy to cancel as it was to sign up. 

“It’s notable that many companies welcome these new rules because it leveled the playing field for companies who are trying to compete with others who may not disclose price increases and other terms,” she said.

Consumer advocates on Wednesday accused the industry groups of “venue shopping” by filing the lawsuit in a conservative-leaning federal appeals court.

Twelve of the active judges were appointed by a Republican president, six of them by former President Donald Trump.

“The big businesses that deploy deceptive subscription models to trap customers are trying to sue their way out of this regulation to lower costs for millions of consumers,” Liz Zelnick, director of the economic security and corporate power program for watchdog group Accountable.US said in a statement. “We’ve seen this movie before, with big industry players venue shopping in a corporate-friendly jurisdiction regardless of the impact on Americans.”

The trade groups could not be immediately reached for comment.

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