The Federal Trade Commission has proposed making it easier for consumers to cancel online subscriptions they no longer want — including to streaming services — with civil penalties for companies that violate the new rules.
The Notice of Proposed Rulemaking released Friday is part of a broader review of the FTC's 1973 negative option rule but also comes in the wake of the agency's lawsuit accusing Amazon of “trapping” consumers into retaining their subscriptions by making it difficult to cancel them.
While the FTC concedes that recurring payment programs have benefits, but said they can be problematic when cancellation is “either difficult or impossible.”
Traditionally the FTC has used its rulemaking authority sparingly, instead suing or settling over alleged violations of existing laws against unfair or deceptive practices. But under chair Lina Khan, the FTC has made it clear it would be flexing its rulemaking muscle, and signaled this was a case of necessity.
“The current patchwork of laws and regulations available to the FTC do not provide consumers and industry with a consistent legal framework,” the regulator said in announcing the proposal.
That proposal would require that online video and other services make canceling subscriptions “at least as easy” as signing up for them — for example, both actions should take the same number of steps on the same website. In addition, for negative option programs for any product other than physical goods, such as ongoing video subscriptions, services would have to provide annual reminders prior to auto-renewal.
The new rule would also require services to ask consumers whether they wanted to hear about additional offers and to take “no” for an answer.
The vote was 3-1, with Khan and fellow Democratic commissioners Rebecca Kelly Slaughter and Alvaro Bedoya approving and Republican Christine Wilson dissenting, saying the rules were overly broad.
“If adopted, this rule would enable more efficient enforcement,” Khan and the Democratic majority said in a statement. “It would create a more powerful deterrent by introducing the risk of civil penalties. And it would allow the Commission to return money to wronged consumers.”
The Computer & Communications Industry Association, whose members include Amazon and Apple, warned against the unintended consequence of creating consumer confusion.
“We agree that unless consumers have clear means to cancel negative option arrangements, they might develop a distrust for retailers, particularly in online commerce," CCIA senior VP and chief of staff Stephanie Joyce said. “CCIA is concerned that the record in this proceeding does not support the FTC’s proposed action and that the expansive, new rules would create duplicative and inconsistent obligations that would invite confusion and uncertainty for both businesses and consumers.”
The Interactive Advertising Bureau (IAB) sounded even more alarmed, saying the new rules "could slow service, burden consumers with irrelevant information, and raise prices."
IAB executive VP for public policy Lartease Tiffith called on the FTC to conduct an economic analysis on the impact of the rules.
“These proposed rules are far broader than what the FTC previewed in 2019,” Tiffith said. “As a result, businesses and consumers have had barely any input, and the agency is making poorly informed and potentially very costly decisions.”
