Federal Trade Commission Implements ‘Click to Cancel’ Rule Affecting Music Streaming Services and Many Others

Washington, D.C.’s Apex Building, which serves as the headquarters of the FTC. Photo Credit: Harrison Keely

It’s about to get easier to cancel subscriptions in the U.S. – at least according to three of the FTC’s five commissioners, who have voted in favor of a “click to cancel” rule that will purportedly “make it as easy for consumers to cancel their enrollment as it was to sign up.”Said rule represents one component of a modification to the FTC’s broader negative option rule. The latter dates back to 1973 and, in a nutshell, concerns products and services delivered automatically under a prior agreement in the absence of a proactive cancellation from the consumer.

That was, of course, long before digital subscriptions and even the internet had arrived on the scene – meaning that the measure allegedly stops short of reaching contemporary streaming offerings and other negative option services.

Moreover, according to critics, newer regulatory efforts in this department failed to adequately protect consumers, referring in part to blind spots affecting “continuity plans, automatic renewals, and free-to-pay conversions,” per the FTC’s final negative option rule.

Though heavy in footnotes, said final rule spans an appalling 230 pages in total, including an analysis of public comments in the leadup to the corresponding vote as well as a whole lot else. Needless to say, covering each involved element would require a substantial amount of time and space.

In the interest of relative brevity, then, the retooled negative option rule, expected to (largely) go into effect 180 days following its publication in the Federal Register, will as laid out by the FTC (or at least the three commissioners who passed it) compel sellers to display pertinent purchase information and terms upfront.(In her dissenting statement, Commissioner Melissa Holyoak claimed the “overbroad” and “likely unlawful” rule exceeded the FTC’s authority and, in terms of its timing, was politically motivated. On the opposite side of the aisle, Commissioner Rebecca Kelly Slaughter, who voted to pass, lamented the absence in the final rule of a provision that would have “required annual reminders of subscriptions that do not involve the delivery of physical goods.” The other dissenting commissioner’s statement is said to be forthcoming.)

But the main attraction here appears to be the initially highlighted FTC click to cancel rule. Diving directly into the relevant regulatory text, the rule says a “simple cancellation mechanism must be easy to find when the consumer seeks to cancel” a negative option service via an “interactive electronic medium.”

That includes barring customer-service-rep conversations as a mandatory precursor to canceling (unless reps had been contacted as part of the initial signup process, that is).

It’s a violation of the rule and “an unfair or deceptive act or practice” under the FTC Act for negative option sellers “to fail to provide a simple mechanism for a consumer to cancel,” the regulation spells out. Also prohibited is preventing consumers from avoiding charges (including for an increased amount) or taking steps to “immediately stop any recurring” charges.Exemptions are available for certain businesses, and penalties are in place for infractions, per the rule. Concluding by bringing the focus back to the music space, cancellations don’t seem to be too big an issue for consumers when it comes to axing on-demand streaming services. But in the satellite radio world, SiriusXM is still facing a lawsuit over its “US music royalty fee surcharge.”

Furthermore, as many know, there are plenty of consumer complaints in and around the live entertainment sphere – meaning big regulation-fueled changes could potentially be forthcoming.