Eighth Circuit Strikes Down FTC ‘Negative Option’ Rule Intended to Protect Consumers

In the high-stakes arena of consumer subscriptions, where a simple click can lock in recurring charges, the Federal Trade Commission (FTC) aimed to level the playing field with its ambitious “Click-to-Cancel” rule. But just days before enforcement, a federal appeals court slammed the brakes, vacating the entire regulation on procedural grounds and leaving businesses and watchdogs scrambling.The Eighth Circuit strikes down FTC ‘Negative Option’ Rule, delivering a blow to consumer safeguards in a market rife with auto-renew traps. This FTC negative option rule vacated 2025 decision, handed down on July 8, underscores procedural pitfalls in agency rulemaking, as the court faulted the FTC for skipping a required economic analysis despite the rule’s projected $100 million-plus impact. As click to cancel rule overturned reverberates, subscription industry players breathe easier, but state laws and existing FTC tools like ROSCA loom large, ensuring the fight against deceptive billing isn’t over.

The Rule’s Ambition: A Bid to End Subscription Shenanigans

The FTC’s Negative Option Rule, finalized on October 16, 2024, sought to overhaul the 1973 framework by targeting all forms of “negative option” marketing—those sneaky setups where consumers must affirmatively opt out to avoid charges. Think free trials that flip to paid subscriptions unless you act fast, or gym memberships that auto-renew annually.Key mandates included:

• Clear Disclosures: Sellers had to prominently reveal recurring terms before billing info collection.
• Separate Consent: A distinct checkbox or affirmative act for negative options, isolated from the main purchase.
• Easy Cancellation: “Click-to-cancel” mechanisms mirroring the signup ease, with live reps available during business hours.
• Record-Keeping: Five years of proof for consents and cancellations.

Originally set for January 14, 2025, the FTC delayed full enforcement to July 14 amid compliance complexities and lawsuits. The agency estimated it would curb billions in unwanted charges, drawing from over 4 million public comments during its 2019-initiated process.

Procedural Pitfall: The $100 Million Oversight

The FTC Act demands a preliminary regulatory analysis for rules with $100 million+ annual economic effects, weighing costs, benefits, and alternatives. An administrative law judge flagged the rule’s impact as exceeding that threshold early in 2024, citing compliance burdens for the 2.2 million affected entities. Yet, the FTC pressed on with only a final analysis, skipping the upfront step.In Custom Communications, Inc. v. FTC, a coalition of industry groups—including cable firms and the U.S. Chamber of Commerce—challenged the rule on authority, arbitrariness, and procedural grounds. Consolidated from multiple circuits, the case landed before Eighth Circuit Judges James Loken, Ralph Erickson, and Jonathan Kobes. The per curiam opinion zeroed in on procedure: The omission prejudiced petitioners by denying early input on less burdensome options, warranting full vacatur under the Administrative Procedure Act.The court didn’t touch substantive merits, noting it didn’t “endorse unfair practices” but couldn’t excuse the “fatal” flaw. The mandate issued weeks later, sealing the rule’s fate unless appealed.

Courtroom Echoes: Challengers Cheer, FTC Fumes

Petitioners hailed the win as a check on overreach. “The FTC rushed a sweeping rule without dotting i’s,” said a Chamber rep, emphasizing the procedural safeguard’s role in informed rulemaking. On X, industry voices buzzed: “Click-to-cancel cancelled—procedural wins save subscriptions from bureaucracy.”FTC Chair Lina Khan’s team decried the ruling as a setback for consumers, vowing to explore appeals or restarts. Dissenters like Commissioners Melissa Holyoak and Andrew Ferguson, who opposed the rule’s 3-2 adoption, saw vindication in the procedural smackdown. Analysts predict a Supreme Court bid within 90 days, though the incoming administration might pivot.Legal scholars split: Some view it as a Cantero-like procedural reset for agencies; others warn of stalling consumer protections in a $500 billion subscription economy.

Lingering Safeguards: ROSCA, States, and Section 5

The vacatur doesn’t greenlight tricks. The Restore Online Shoppers’ Confidence Act (ROSCA) still mandates clear disclosures and easy cancels for online negatives, with FTC racking up multimillion settlements. Section 5’s ban on unfair/deceptive acts covers all media, while 13+ states enforce auto-renewal laws—California’s CARL, updated July 1, 2025, demands separate consents and curbs “save” attempts. Massachusetts joins September 2.Businesses face a patchwork: Non-compliance risks class actions or AG suits, with states like New York eyeing stricter probes.

Why U.S. Consumers and Companies Should Care: Wallets and Watchdogs

For everyday Americans drowning in 10+ average subscriptions—costing $219 yearly in forgotten fees—this ruling delays easier exits, potentially fueling “subscription fatigue” complaints to the FTC (up 20% in 2024). Economically, it spares firms $3-5 billion in compliance but invites state-level chaos, hiking legal costs for national brands.Politically, it tests Biden-era agency power post-Loper Bright, with CFPB/FTC synergies under fire. Lifestyle hit? Shoppers must hunt cancels manually, but tools like Rocket Money thrive. Careers? Compliance pros pivot to state audits, while consumer attorneys gear for a litigation surge.

Ruling’s Reckoning: Appeal or Autopsy?

The Eighth Circuit strikes down FTC ‘Negative Option’ Rule, etching FTC negative option rule vacated 2025 into regulatory lore and click to cancel rule overturned as a procedural cautionary tale. As the FTC weighs a Supreme Court push by October 2025, expect a rulemaking reboot or reliance on piecemeal enforcement—preserving consumer arms but stunting sweeping reform. In subscription wars, the battle shifts to states and statutes, where easy cancels might yet click into place, one opt-out at a time.By Sam Michael September 29, 2025Follow and subscribe to us for push notifications—stay ahead with instant alerts on breaking legal news and rulings!Eighth Circuit strikes down FTC negative option rule, FTC negative option rule vacated 2025, click to cancel rule overturned, Custom Communications v FTC ruling, negative option marketing regulation, FTC rulemaking procedural error, subscription cancellation FTC, ROSCA auto-renewal law, state automatic renewal laws 2025, consumer protection FTC rule