In a significant move that commenced on October 24, 2024, cable companies, alongside advertising firms and newspapers, have filed lawsuits with the intention of blocking a new Federal Trade Commission (FTC) rule designed to simplify the cancellation process for consumers. The rule, dubbed 'click-to-cancel', was recently approved by the FTC to mandate businesses to provide clear and straightforward mechanisms for consumers to end recurring services and charges.

The Legal Challenge

The NCTA - The Internet & Television Association and the Interactive Advertising Bureau have taken action by suing the FTC through the US Court of Appeals for the 5th Circuit, citing that it’s an adequate venue as the Electronic Security Association, a plaintiff, is based in Dallas. Meanwhile, a corresponding lawsuit was lodged in the 6th Circuit by the Michigan Press Association and the National Federation of Independent Business. Both lawsuits echo a common grievance: the rule overly regulates consumer contracts across diverse industries with 'negative option' contracts, where the service extends unless actively canceled by the consumer.

Claim Basis

These legal challengers argue the FTC’s directive is arbitrary and exceeds the commission's legal boundaries as outlined by the Administrative Procedure Act and the US Constitution. The rule aims to target what it perceives as deceptive 'negative option' contracts, claiming it would cover more than a billion paid subscriptions in the US. The complainants argue that this not only imposes heavy regulatory burdens but potentially breaches the scope of the FTC’s statutory authority.

FTC Stands Firm

Despite these challenges, the FTC is steadfast, although it declined to comment on ongoing litigation. The rule mandates clear disclosures and consumer consent to combat misleading practices. With full effect planned 180 days post its publication in the Federal Register, the rule seeks to ensure sellers obtain affirmative consent from consumers before any charges and forbids misrepresentations when marketing such options.

Cable Industry Concerns

The cable industry, notably NCTA, which includes giants like Comcast and Charter, argues that the rule hampers their ability to engage consumers who might consider canceling. They contend that discussing potential consequences and offering alternatives is essential—claiming the rule violates First Amendment rights. Similarly, the Interactive Advertising Bureau poses that the rule could stifle innovation and adaptability in customer offerings.

FTC’s Defense

Enforcement of the rule is backed by the FTC’s reading of Section 18 of the FTC Act, which empowers them to detail unfair or deceptive acts. FTC Chair Lina Khan emphasized the rule’s necessity to dismantle the complex barriers consumers face when attempting to cancel services—highlighting the time and expense savings it promises American consumers.

To delve into more details on this regulatory battle, read up on the news from Ars Technica.