Eighth Circuit Vacates FTC's Negative Option Rule

On the metaphorical eve of the July 14 effective date for the FTC's Negative Option Rule, the Eighth Circuit released an opinion Tuesday vacating the Rule in its entirety. The economy-wide notice, consent, cancellation, and other requirements in the Rule have been nullified by the Eighth Circuit's decision.

The court's decision is based on procedural grounds: the FTC erroneously determined that the national economic effect of the proposed rule would be under $100 million, and on this basis declined to conduct a preliminary regulatory analysis that would have identified alternative approaches, along with estimates of their costs and benefits. The court held that this failure deprived businesses and other interested parties of the opportunity for informed participation in the rulemaking process. The court determined that the relevant provisions of the FTC Act required the court to set aside the entire Rule.