Regulation

Feds Want to Penalize Overly Complicated Subscription Cancellations at $50,000 a Pop

A government big enough to "solve" your minor irritants will do plenty of other stuff you don't like.

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Not that you'd know it from the news coverage, but the feds are threatening ,000 for *any* misrepresentation by companies that do stuff like auto-renewing subscriptions. | null/Newscom
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What kind of monster doesn't want the federal government to make it easier for consumers to cancel unwanted subscriptions? That's the unspoken premise behind basically every headline covering last week's Federal Trade Communication (FTC) notice of proposed rulemaking to mandate "click to cancel" functionality on companies that use "negative option marketing" tactics such as free trials and automatic renewals.

"Still trying to quit that gym membership? The FTC is proposing a rule that could help," reported NPR. "Frustrated over canceling a subscription? Relief may be coming," offered The Washington Post. CNN added, in the most common headline formulation: "FTC wants to make it easier for consumers to cancel free trials and subscriptions."

The proposed rule requires negative-option sellers to provide, under maximum penalty of $50,120 per violation per day, a mechanism for cancellation that's "at least as simple as the one used to initiate the charge," via the same medium (app, website, phone, mail, etc.). Explained FTC Chair Lina Khan on Morning Edition: "When you're talking about companies that have hundreds or thousands or millions of consumers, that could add up quite quickly."

This borderline-gleeful attitude is part of the reason Khan is a figure of constant controversy. But it's also consistent with the policies of President Joe Biden, who spent paragraphs of his State of the Union address in February railing against "junk fees," travel surcharges, and so forth. "Americans are tired of being—we're tired of being played for suckers," Biden said.

The only Republican appointee on the FTC, Christine Wilson, was also the lone vote against the FTC's proposed rulemaking last week. And though you'd be hard-pressed to find any of her specific objections in all those "Subscriptions can be hell to cancel" headlines, her dissent points out that the rule as written constitutes a major regulatory power grab:

the Notice explains that "the proposed Rule prohibits any person from misrepresenting, expressly or by implication, any material fact regarding the entire agreement—not just facts related to a negative option feature." It further explains that "[s]uch deceptive practices may involve misrepresentations related to costs, product efficacy, free trial claims, processing or shipping fees, billing information use, deadlines, consumer authorization, refunds, cancellation, or any other material representation."

Consequently, marketers using negative option features in conjunction with the sale of a good or service could be liable for civil penalties or redress under this Rule for product efficacy claims or any other material representation even if the negative option terms are clearly described, informed consent is obtained, and cancellation is simple.

Emphases added. Though you would never know it from the shallow THEY FIX PROBLEM! news coverage, the FTC is telling the estimated 106,000 businesses that use such subscription-renewal techniques that they will face potentially crippling fines if activist bureaucrats deem any of their business processes, whether related to subscription renewals or not, to be misleading.

Such regulatory mission creep is as predictable as receiving an AARP card in the mail during your 50s. Governments that are big enough to police the language of magazine auto-renewals are guaranteed to intrude on personal consumption choices in ways that even corporationophobes find uncomfortable. The FTC's vigorous exertions under Biden include:

* Asking Twitter to rat out the names of all journalists involved in working on the #TwitterFiles series of investigations.

* Proposing—without any relevant legislative prompt—a near-total ban on workplace noncompete contracts.

* Attempting (before being thwarted by a federal judge) to block Meta's acquisition of a virtual reality company on the legally adventurous grounds that in doing so the Facebook owner would prevent itself from innovating in the virtual reality space.

* Challenging Microsoft's purchase of a video game company, because reasons.

* Investigating Amazon for, in the words of Reason's Elizabeth Nolan Brown, "everything from its purchase of the robot vacuum maker iRobot to whether digital voice assistant Alexa violates the Children's Online Privacy Protection Act and how it decides which marketplace products to give the 'Amazon Choice' label."

Khan's regulatory zeal and process overreach has led Christine Wilson to announce her resignation from the commission, citing Khan's "disregard for the rule of law and due process," among other complaints.

The click-to-cancel rule is guaranteed to jack up compliance costs (which hurt small entities hardest) and drive some current practitioners out of the negative-option market altogether. No more easy-peasy renewals for your favorite poetry magazine or coffee roaster.

But don't worry, the proposal is still open to feedback from the public. And The Washington Post's Michelle Singletary, for one, wants to make sure the process is impartial: "This is your chance to be heard. If you have a horror story about canceling a free trial, auto-renewal or subscription, tell the FTC."