A federal appeals court has halted a new Federal Trade Commission (FTC) rule designed to make it easier for consumers to cancel unwanted subscriptions and memberships, just days before it was set to take effect.
The rule, introduced by the FTC in October, aimed to protect consumers by requiring businesses to get explicit consent before charging for memberships, automatic renewals, and services tied to free trial offers. It also mandated clear disclosures about when free trials or promotions end, and that canceling recurring subscriptions should be as simple as signing up.
This regulation was part of President Joe Biden’s “Time is Money” initiative, a broader government effort announced last year to reduce consumer hassles.
However, the U.S. Court of Appeals for the Eighth Circuit ruled this week that the FTC made a procedural misstep by not conducting a preliminary regulatory analysis—a requirement for rules expected to have an annual economic impact exceeding $100 million. The FTC had initially argued that the rule’s economic effect would be under that threshold. But an administrative law judge determined otherwise.
As a result, the court vacated the rule, stating, “While we do not condone unfair and deceptive practices in subscription marketing, the Commission’s procedural errors are fatal here.”
The FTC declined to comment on the decision.
Meanwhile, the FTC is preparing for a trial against Amazon over its Prime membership program. The lawsuit alleges that Amazon enrolled customers without their consent and made cancellations difficult. The trial is expected to take place next year.
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