Eighth Circuit Cancels FTC Negative Option Rule: What Does It Mean?

The U.S. Court of Appeals for the Eighth Circuit vacated the Federal Trade Commission's Rule Concerning Subscriptions and Other Negative Option Plans (often referred to as the "Click-to-Cancel" rule) on July 8, just days before the FTC was set to begin enforcement of the rule.

The decision resolved various consolidated petitions challenging the rule on grounds that it exceeded the scope of the FTC's authority, was not promulgated in accordance with necessary rulemaking procedures, and was overly broad. The winning argument, though, was that the FTC skipped the critical step of issuing a preliminary analysis of the benefits and effects of the proposed rule and any reasonable alternatives, because it initially failed to treat the rule as "economically significant" to the national economy.