US FTC Introduces Simplified “Click-to-Cancel” Rule
Why in the News?
The US Federal Trade Commission (FTC) introduced the “Click-to-Cancel” rule to simplify the subscription cancellation process. This rule aims to protect consumers from unfair practices by making cancellation as easy as signing up.
Overview:
- The US Federal Trade Commission (FTC) has announced a new “Click-to-Cancel” rule aimed at simplifying the process of cancelling subscriptions and memberships.
- The rule aims to prevent businesses from complicating cancellations and imposes civil penalties for non-compliance.
- The FTC approved the rule with a 3-2 vote to protect consumers from unfair practices, as explained by FTC Chair Lina Khan.
Key Provisions of the Rule:
- Sellers must make cancellations as easy as the original sign-up process.
- Consumers cannot be required to speak with a representative if they did not need to during sign-up.
- Companies cannot charge extra for phone cancellations and must respond to phone messages promptly.
- In-person cancellation is not required for services signed up for online or over the phone.
Applicability and Rationale:
- The rule applies to all “negative option” programs, which automatically renew unless cancelled, including online, phone, or in-person subscriptions.
- The regulation was introduced due to a rise in consumer complaints about difficult cancellations.
- It is part of the FTC’s review of its 1973 Negative Option Rule, modernising protections in today’s digital economy where subscription models are growing rapidly.
About the FTC :
- Purpose: Monitors and prevents anticompetitive, deceptive, or unfair business practices.
- Established: 1914, originally to prevent unfair competition.
- Authority: Enforced through laws prohibiting deceptive acts, with expanded powers over time.
Goals:
- Consumer Protection: Prevent fraud and unfair business practices.
- Competition Maintenance: Prevent anticompetitive mergers and practices.
- Performance Improvement: Strive for organisational and operational excellence.
Bureaus:
- Bureau of Consumer Protection: Investigates unfair practices and educates consumers.
- Bureau of Competition: Enforces antitrust laws.
- Bureau of Economic Analysis: Analyses the economic impact of FTC actions and regulations.
Sources Referred:
PIB, The Hindu, Indian Express, Hindustan Times