FTC ‘Click to Cancel’ Rule to Make Ending Subscriptions Easy (1)

Consumers must be able to cancel subscriptions as easily as they sign up for them, the Federal Trade Commission proposes in a rule likely to have a wide-ranging impact including on fitness and media companies.

The FTC’s proposal would require companies that allow online sign-ups to also offer online cancellations options in just a few steps, rather than forcing customers to quit in person or over the phone. Companies would also have to send reminders before automatic renewals are billed.

“Companies should not be able to manipulate consumers into paying for subscriptions they don’t want,” FTC Chair Lina Khan said. As more companies have shifted to a subscription-based business model that “has created greater opportunities for mischief,” she said.

Lina Khan, chair of the Federal Trade Commission (FTC), speaks with Representative Mike Quigley, a Democrat from Illinois and chairman of the House Appropriation Subcommittee on Financial Services and General Government, left, during a hearing in Washington, D.C.

Photographer: Al Drago/Bloomberg

President Joe Biden came out in support of the FTC’s proposed rule Thursday.

“Too often, companies make it difficult to unsubscribe from a service, wasting Americans’ time and money on things they may not want or need,” he said in a Twitter post. “It shouldn’t be harder to cancel a service than it was to subscribe for it.”

While newspaper and magazine subscriptions have existed for decades, today consumers can sign up for recurring subscriptions for everything from razors and makeup to digital tokens for use in online or mobile games. Companies like Netflix Inc., Peloton Interactive Inc. and Spotify Technologies SA have succeeded by moving consumers to subscriptions rather than one-time purchases, and major online players like Apple Inc. have seen more of their revenue coming from its services like Apple Music and Apple TV+.

Netflix, Peloton and Spotify make it relatively easy to cancel subscriptions already, on their websites or through their apps. Others make it harder. Cable-television companies, for example, usually require consumers to phone in to cancel, while Adobe Inc. subscribers must cancel within 14 days of a purchase to receive a full refund, otherwise they incur a prorated penalty.

UBS Wealth Management estimated that subscriptions will expand into a $1.5 trillion market by 2025, up from $650 billion in 2020.

The average American spent $273 a month on subscription services in 2021, according to consulting firm West Monroe, up from $237 in 2018. Yet another 2021 survey by Chase found 56% of consumers said they have trouble tracking recurring subscriptions and it takes about three months for them to cancel unneeded ones.

In recent years, Apple, AT&T Inc.’s DirecTV and Sirius XM Holdings Inc. have been dinged for making it too hard for customers to cancel. The FTC has also been investigating Amazon.com Inc. over allegations that its Prime membership program is difficult to cancel.

The proposed rule is the latest from the FTC, an antitrust and consumer protection agency that has taken on a more aggressive approach under Khan. Last year, the FTC proposed a rule to curb online data collection and in January proposed another that would ban nationwide non-compete clauses that bar employees from switching jobs in an industry.

(Updates to add Biden comments in fourth paragraph.)

To contact the reporter on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Joe Schneider, Elizabeth Wasserman

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