Eighth Circuit Vacates FTC's Negative Option Rule Just Before It Takes Effect

Just days before the Federal Trade Commission's Rule Concerning Subscriptions and Other Negative Option Plans (the "Rule") was set to take effect on July 14, the U.S. Court of Appeals for the Eighth Circuit issued a significant decision vacating the Rule in its entirety. The decision leaves businesses with a changed compliance landscape — at least for now.

Why the Rule Was Vacated

The court's ruling did not touch on the substance of the Rule itself, but instead focused on the FTC's failure to promulgate the Rule in accordance with necessary rulemaking procedures. Specifically, the FTC had preliminarily concluded that the Rule would not have an economic impact exceeding $100 million annually. This determination exempted the agency from conducting a more thorough preliminary regulatory analysis under the FTC Act, which would have required exploring reasonable alternatives and providing an analysis of the benefits and effects of the proposed Rule.