News Stories

In a press release the Federal Trade Commission (FTC) announces that the FTC voted to defer the compliance deadline for the amended Negative Option Rule by 60 days.  The Commission vote to postpone the compliance deadline was 3-0. 

The Commission issued a statement on the new deadline.

The Federal Trade Commission (FTC or Commission) on May 9, 2025, voted to defer the compliance deadline for the amended Negative Option Rule (Rule) by 60 days “given the complexities” of conforming to the amended Rule.  The Negative Option Rule, is often referred to as the “Click-to-Cancel Rule.” 

With the extended 60 day compliance deadline, businesses now have until July 14, 2025, to come into compliance with the Rule’s requirements, including providing additional disclosures, consents and simple cancellation protocols for all sales (including business-to-business) with a negative option feature, such as auto-renewing subscriptions and sales. 

Companies must ensure compliance with the Rule requirements given the Commission’s statement that “regulated entities must be in compliance with the whole of the Rule because the Commission will begin enforcing it.” The FTC also noted that “if enforcement experience exposes problems with the Rule, the Commission is open to amending the Rule to address any such problems.” 

If your company offers auto-renewing subscriptions and sales, make sure you understand the impact of the new Rule has on your business and what changes may be needed to ensure compliance with the new rule. 

In a statement regarding the extension, the FTC explained that, in its view, companies need additional time to address the complexities of the Click-to-Cancel Rule. “Having conducted a fresh assessment of the burdens that forcing compliance by [May 14, 2025] would impose, the Commission has determined that the original deferral period insufficiently accounted for the complexity of compliance.”

As background, on Oct. 16, 2024, the FTC announced its final “Click-to-Cancel” Rule for subscription services and other negative option offers. The rule requires sellers to make it as easy for consumers to cancel subscriptions as it was to sign up for them. The rule also changes businesses’ marketing, disclosure, consent, and recordkeeping requirements and gives the FTC the authority to seek redress and civil penalties for rule violations.

In a press release issued at the time the final rule was issued, the Commission explained it was “modernizing” the Negative Option Rule “to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy where it’s easier than ever for businesses to sign up consumers for their products and services.” The Commission also explained that it “receives thousands of complaints about negative option and recurring subscription practices each year,” with the number of complaints “steadily increasing over the past five years.”  

Scope – Who Must Comply With the Negative Option Rule?

The FTC’s Negative Option Rule  -often referred to as the Click to Cancel Rule – applies to any person who sells, offers, charges, or otherwise markets goods or services with a negative option feature. This includes both business-to-consumer (B2C) and business-to-business (B2B) transactions. The rule covers a wide range of scenarios, including automatically renewing subscriptions, free trials that convert to paid subscriptions, and recurring product shipments. 

As noted above, the Final Rule applies to all negative option programs, regardless of media (i.e., whether the offer appears online, on the phone, or in person) and regardless of the transaction is business-to business (B2B) or business-to-consumer (B2C).  Under the Final Rule, negative option programs include any program with a provision that interprets a “consumer’s silence or failure to take affirmative action to reject . . . or to cancel” as an acceptance of the offer, including, without limitation, automatic renewals, continuity plans, free trials (i.e., free-to-pay or nominal fee-to-pay conversions), and pren-otification plans.  This scope differs from the FTC’s prior negative option rule which only applied to pre-notification plans.  This scope also probably differs from most state automatic renewal laws since it applies to both B2B and B2C transactions, whereas many states with automatic renewal laws only apply such laws to B2C transactions.

In terms of B2B transactions, the FTC acknowledged it received comments that the Final Rule should not apply to B2B transactions, but the Commission rejected such pleas.  In declining to limit the scope of the rule, the Commission cited its “longstanding view that Section 5 of the FTC Act protects business consumers as well as individual consumers.” Notwithstanding the FTC’s broad approach, the Commission was careful to explain it is neither the purpose nor outcome of the Final Rule to prevent the ability of sophisticated business consumers to negotiate bespoke B2B negative option terms. It appears that a B2B consumer who individually negotiates a negative option term can also individually negotiate the cancellation mechanism. Here it is important to seek legal advice on your company’s specific situation.  The Commission pointed out that it has not used its consumer protection authority in large individually negotiated B2B transactions that do “not tend adversely to affect the public.”  The Commission appears to believe the Final Rule adequately preserves the rights and needs of sophisticated business consumers to negotiate B2B terms.  Again, it is important to seek the advice of legal counsel.

Features of the Negative Option Rule 

Negative option features are contract provisions “under which a consumer’s silence or failure to take affirmative action to reject a good or service or to cancel the agreement is interpreted by the negative option seller as acceptance or continuing acceptance of the offer.”

Companies routinely use negative option features in their marketing efforts including “automatic renewals,”, in which sellers automatically renew consumers’ subscriptions when they expire, unless consumers affirmatively cancel the subscriptions. They also often include “free trials” in which goods or services are offered for free (or at a reduced price) for a trial period and, after the trial period, at a higher price unless consumers affirmatively cancel or return the goods or services.

As previously reported, the rule defines four practices as unfair and deceptive within the meaning of Section 5 of the FTC Act.

Misrepresentations – The rule prohibits negative option sellers from misrepresenting, expressly or by implication, any material fact, including any fact regarding the negative option feature or the cost, purpose or efficacy, health, or safety of the underlying good or service.

Disclosures – The rule requires negative option sellers to clearly and conspicuously disclose, prior to obtaining the consumer’s billing formation, all material terms, including, but not limited to, the material terms relating to the negative option offer. four specific disclosures enumerated by the Final Rule must be disclosed directly adjacent to the means of recording consumer consent to the negative option feature. Those four disclosures are (1) the charges will be recurring unless the consumer cancels and, for trials, that charges will increase after the trial period, (2) the deadline to stop charges, (3) the amount and frequency of the charges, and (4) how to find the cancellation mechanism. No other information can be included that undermines consumers’ ability to understand those four disclosures.

Clear and Conspicuous – Consistent with longstanding FTC guidance and practice, the Final Rule states that a required disclosure is “Clear and Conspicuous” if it is “easily noticeable,” “difficult to miss” (e.g., a visual disclosure must “stand out from any accompanying text or other visual elements”), and easily understandable by ordinary consumers.” In addition to these general standards, the Final Rule provides medium-specific prescriptions for disclosures made via audio, visual, audiovisual, or electronic media, and states that when a business targets a specific audience (e.g., children, elderly, or terminally ill), the members of that group will be judged to be the “ordinary consumers.” Of the medium-specific prescriptions, most notable is that disclosures made through the internet, a mobile app, or other “Interactive Electronic Medium” must be “unavoidable.”

Consent – The rule requires negative option sellers to obtain the consumer’s express, informed consent to the negative option feature, separately from any other portion of the transaction and before charging the consumer—for instance, via a separately presented check box.

Easy Cancellation – The rule requires negative option sellers to provide a simple cancellation mechanism for consumers to cancel the negative option feature, with that mechanism being “at least as easy to use as the mechanism the consumer used to consent” to the negative option feature. Moreover, the cancellation mechanism must be provided through the same medium the consumer used to sign up for the negative option feature, and cannot be only a live or virtual representative, like a chatbot. That is, if consumers sign up for a service online, they cannot be required to interact with a live or virtual representative, like a chatbot, to cancel.

With the rule’s new compliance deadline now set for July 14, 2025, all companies should take this additional time to consult with an attorney and assess if your company has any negative option offers and develop corrective plans, if necessary, to comply with the rule.  It might also be advisable to use this time to also review any state law requirements that may apply to negative option features. 

As noted above, companies offering customer or B2B negative option terms, adherence to the new rule alone may not ensure compliance with applicable state requirements.  For example, the FTC specifically declined to include after-sale notifications in the rule; however, certain state jurisdictions may still require such notifications for B2B negative option plans. Given such complexities and potential legal challenges, it is crucial to seek legal advice in designing and documenting customer interfaces that meet or exceed applicable requirements.