Client Alert
Sarah A. Milunski, Melissa G. Powers, Clare H. Nowogrocki
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On July 8, 2025, the United States Court of Appeals for the 8th Circuit vacated the Federal Trade Commission’s “Click-to-Cancel” rule. The rule was scheduled to go into effect on July 14, 2025 after having been delayed from its original effective date of May 14, 2025. The “Click-to-Cancel” rule would have overhauled the existing Federal Trade Commission (FTC) rule governing negative option (also known as automatic renewal) features, significantly impacting businesses that use such features (as discussed in our prior alert found here). Various industry associations and businesses challenged the rule in multiple courts, prompting the petitions to be consolidated for review in the 8th Circuit.
In its opinion, the court noted that the FTC failed to follow procedural requirements under the FTC Act—specifically, the FTC admitted it did not conduct a preliminary regulatory analysis, which is required for any proposed rule with an estimated annual economic effect of at least $100 million. While the FTC initially concluded that the proposed amendments would not have the requisite $100 million effect on the national economy (thereby excusing the FTC from conducting the preliminary regulatory analysis), an administrative law judge disagreed and concluded that the rule’s compliance costs for businesses would exceed $100 million. Rather than conducting a preliminary regulatory analysis after the administrative law judge’s ruling, the FTC finalized the rule.
The court found that the FTC’s procedural failure to conduct the preliminary regulatory analysis was “fatal” to the rulemaking process. The court declined to excuse the FTC’s failure, which it believed could open the door to future manipulation of the rulemaking process. Because a preliminary analysis would have permitted public comment on reasonable alternatives to the proposed rule, a cost-benefit analysis of each alternative, and an assessment of the rule’s effectiveness, the court found that the petitioners had been harmed when they lost the opportunity to engage with the FTC at an earlier stage of rulemaking. While the petitioners also presented other substantive challenges to the rule (namely, that the rule failed the specificity and prevalence requirements and was arbitrary and capricious), the court found that because the FTC’s rulemaking process was procedurally insufficient and petitioners had been harmed, the court need not address petitioners’ other challenges.
Although the rule included a severability provision intended to ensure that if one or more provisions were determined to be invalid the remaining provisions would stay in force and continue to be applied, the court vacated the entire rule because of the level of prejudice suffered by the petitioners as a result of the FTC’s procedural error. The court further found that, given the breadth of the rule’s coverage, a party-specific vacatur was not feasible.
The 8th Circuit’s vacatur means that the “Click-to-Cancel” rule will not take effect on July 14th as planned. We will continue to monitor any future impact of the 8th Circuit’s ruling.
If you need assistance with complying with federal and state automatic renewal laws or restructuring your subscription service, please contact one of the authors of this alert.

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