The FTC wants to ban those tough-to-cancel gym and cable subscriptions
The US Federal Trade Commission is proposing a formal ban on subscriptions that are simple to start but difficult to stop. This morning, it announced a notice of proposed rulemaking it dubs “click to cancel,” requiring companies to make ending a subscription equivalently simple to signing up for one. That includes letting people use the same method for both actions — so a business can’t, for instance, let someone sign up for a service online but make them call a phone number to cancel.
The rule has a couple of other provisions. Many companies try to keep subscribers by offering special deals or perks, and they’re still allowed to do that, but they must offer an up-front opt-out that lets customers bypass the sales pitches. They also have to annually remind consumers that they’re enrolled in what are dubbed “negative option” programs, or programs where failing to cancel something is considered an agreement to keep 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 pass the final regulation.
“Companies should not be able to manipulate consumers into paying for subscriptions that they don’t want,” FTC chair Lina Khan told reporters in advance of the announcement. “We get countless complaints about this.”
“We get countless complaints about this.”
The FTC already considered what some critics dub “roach motel” practices unlawful under bans on unfair or deceptive business practices, and under Khan, it’s gone after companies employing “dark patterns” — a blanket term for interfaces that deceive or manipulate people. Among other incidents, last year, it settled a $100 million lawsuit with telecom provider Vonage, which the FTC alleged created an artificially difficult cancellation process to lock people into subscriptions.
But a formal ban sets a codified standard for what’s unlawful and gives the FTC more flexibility to demand restitution from companies that break the rule. The agency can recover around $50,000 per individual violation of a consumer’s rights, and consumer lawsuits can recover damages for lost funds and potentially wasted time. And formal standards are increasingly relevant as more and more companies push ongoing service models over ownership. “We’ve seen over the last few years in particular a shift that companies are making more and more to subscription models,” Khan says. “That shift to greater subscriptions has created more opportunity for mischief.”