The US Federal Trade Commission is proposing a formal ban on subscriptions that are easy to start but hard to stop. This morning, he announced a proposed rulemaking notice he calls “click to cancel,” which requires companies to make ending a subscription as simple as signing up for one. That includes allowing people to use the same method for both actions, so a business can’t, for example, allow someone to sign up for an online service but call a phone number to cancel.
The rule has a couple of other provisions. Many companies try to keep subscribers by offering special offers or benefits, and they still can, but they must offer an opt-out up front that allows customers to circumvent the sales pitch. They must also remind consumers annually that they are enrolled in what are called “opt-out” programs, or programs where failure to pay something is considered an agreement to continue paying, for anything but physical goods. Now, the agency has opened a public comment period for the proposal, after which it will potentially make revisions and approve the final regulation.
“Businesses shouldn’t be able to manipulate consumers into paying for subscriptions they don’t want,” FTC Chair Lina Khan told reporters before the announcement. “We get countless complaints about this.”
“We get countless complaints about this.”
The FTC has already considered what some critics call practices “roach motel” illegal under the unfair or deceptive trade practices bans, and under Khan, has gone after companies employing “dark patterns” — a general term for interfaces that trick or manipulate people. Among other incidents, it settled a $100 million lawsuit last year with telecommunications provider Vonage, which the FTC says created an artificially difficult opt-out process to lock people out of subscriptions.
But a formal ban sets a codified standard for what’s illegal and gives the FTC more flexibility to demand restitution from companies that break the rule. The agency can recover about $50,000 per individual violation of consumer rights, and consumer lawsuits can recover damages for lost funds and potentially lost time. And formal standards are becoming more relevant as more and more companies push ongoing service models over property. “We’ve seen in recent years, in particular, a shift that companies are making more and more towards subscription models,” says Khan. “That shift to higher subscriptions has created more opportunities for mischief.”
