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.

US FTC Introduces Simplified "Click-to-Cancel" Rule

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