(Credit: rvlsoft via Getty Images)
The cable TV and broadband industry is suing the Federal Trade Commission over a new rule intended to help consumers easily cancel unwanted subscriptions, arguing that it's unlawful.
Three trade groups that represent the cable industry, advertisers, and video surveillance companies filed a lawsuit in a US appeals court to invalidate the FTC’s “click to cancel” rule.
The NCTA – The Internet & Television Association, which counts Comcast, Charter Communications, and Disney among its members, filed the lawsuit alongside the Interactive Advertising Bureau and the Electronic Security Association.
The trade groups take issue with a section of the FTC’s new rule that will crack down on another controversial business practice called “negative option programs.” That’s when a vendor continues charging your credit card, sometimes without your knowledge, simply because you failed to take action on your subscription. Free trial programs and automatic renewals that charge your credit card past a certain date all fall under this category.
To prevent unwanted subscriptions, the FTC’s click-to-cancel rule is designed to force vendors to be up-front about free trials and other plans that feature automatic renewal. Companies would also need to obtain proof of consent from customers during the sign-up process for the negative option programs.
Recommended by Our Editors
However, the lawsuit claims these negative option contracts cover over “a billion paid subscriptions” in the US. The trade groups also argue the FTC’s click-to-cancel rule essentially “deems them all to be deceptive unless they comply with onerous new regulatory obligations regarding disclosures.”
“The Final Rule is an attempt to regulate consumer contracts for all companies in all industries and across all sectors of the economy in which the customer purchases a service or subscription that will continue unless the customer exercises the option to cancel,” the trade groups added.
In their filing, the trade groups call the FTC’s click-to-cancel rule “arbitrary, capricious, and an abuse of discretion” of the agency’s regulatory authority. The lawsuit demands that the appeals court review the FTC regulation in the hopes that it will be ruled unlawful and thus blocked.
Ars Technica also reports that two other trade groups representing newspapers in Michigan and small businesses have filed a similar lawsuit in another US appeals court.
The FTC didn’t immediately respond to a request for comment. But the click-to-cancel rule won’t fully take effect until next year, or 180 days after the regulation is published in the US Federal Register.