FTC ‘Click-To-Cancel’ Rule Makes It Easy To End Subscriptions: What It Means For Netflix, Planet Fitness And More – Planet Fitness (NYSE:PLNT), Amazon.com (NASDAQ:AMZN)

The Federal Trade Commission (FTC) finalized a rule Wednesday aimed at simplifying subscription cancellations. 

The Details: The new rule is called “click-to-cancel.” It aims to protect consumers from businesses that make it difficult, or even impossible, to cancel subscriptions. 

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Commission Chair Lina M. Khan. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

The final rule is part of the FTC’s ongoing efforts to modernize the 1973 Negative Option Rule in order to combat unfair and deceptive practices related to subscriptions and memberships. The agency reported complaints regarding recurring subscription practices have been steadily increasing over the past five years and in 2024 the FTC received nearly 70 consumer complaints per day on average, up from 42 per day in 2021.

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Why It Matters: The click-to-cancel rule will go into effect in about six months and could have major consequences for digital retailers including Amazon.com, Inc. AMZN, online service providers like Netflix, Inc. NFLX and more traditional subscriptions like The New York Times Co. NYT. Under the new rule, companies will have to get consent for subscriptions, auto-renewals and free trials that convert to paid memberships and must “make it as easy for consumers to cancel their enrollment as it was to sign up.” 

The FTC has previously targeted Amazon’s business practices which it claims includes enrolling consumers into its Prime subscription service without their expressed consent and then making it difficult for consumers to cancel the Prime subscriptions. The FTC has also scrutinized similar subscription services from other large retailers including Walmart, Inc. WMT and Best Buy Co., Inc. BBY. 

Planet Fitness, Inc. PLNT has become well-known for its notoriously difficult-to-cancel gym memberships. The issue was highlighted in a tweet from FTC Chair Kahn and later featured in a Bear Cave short-seller report on the company.  

“FTC has made clear that to comply with the law, businesses must ensure sign-ups are clear, consensual and easy to cancel,” Khan tweeted in reference to a complaint about Planet Fitness’s cancellation process. 

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Image: Markus Winkler from Pixabay