Podcast - The FTC and Consumer Online Transactions

Welcome to another podcast of "Clearly Conspicuous." As we've noted in previous sessions, our goal in these podcasts is to make you succeed in this current environment, make you aware of what's going on with the federal and state consumer protection agencies, and give you practical tips for success. It's a privilege to be with you today. Today we discuss the Federal Trade Commission (FTC) and consumer online transactions.

Welcome to today's episode, where we take a deep dive into what the FTC has been doing to protect consumers in the world of online transactions. If you have ever signed [up] for a free trial that turned into a paid subscription you did not want, and you struggled to cancel a membership, or wondered whether the advertising you saw online was actually telling the truth, this episode is for you.

Overview of FTC Enforcement Actions in E-Commerce: Click to Cancel Rule, ROSCA

The FTC, as you know, is the nation's consumer protection agency, and its mission is to protect the public from deceptive or unfair business practices. Over the past few years, the FTC has been extremely active on several fronts related to online commerce, from tackling deceptive subscription enrollment practices and burdensome cancellation policies, to enforcing rules about clear and conspicuous disclosures, to making it easier for everyday consumers to report fraud and file complaints. So let's walk through these key developments.

First, let us talk about what is known as a "negative option." A negative option is an offer where the seller treats the consumer's silence — meaning the consumer's failure to reject an offer or cancel an agreement — as consent to be charged for goods or services. Think automatic subscription renewals, free-trial-to-paid conversions and continuity plans. If you have ever forgotten to cancel a trial and then noticed charges on your credit card, you have encountered a negative option.

In October 2024, the FTC announced its final "Click-to-Cancel" Rule, formally known as Amendments to the Negative Option Rule. The revisions were designed to protect people from misleading enrollment tactics, billing practices and cancellation policies, while providing businesses with clear rules of the road. The amended rule applied to nearly all negative option marketing — including prenotification and continuity plans, automatic renewals and free trial offers — whether the offer appeared online, on the phone or in person. The rule even covered business-to-business transactions, not just business-to-consumer.

Key provisions of the rule prohibited material misrepresentations about any important aspect of a negative option offer. The rule also required that businesses obtain express informed consent before charging consumers and provide a simple mechanism for cancellation. The rule was initially set to take full effect in stages: The prohibition on material misrepresentations took effect on January 14, 2025, and the remaining disclosure, consent and cancellation requirements were set for May 14 of 2025. However, on May 9 of last year, the FTC unanimously voted to defer the compliance deadline by 60 days, moving it to July 14, after determining that the original deadline "insufficiently accounted for the complexity of compliance."

Then, not to be boring, a significant twist happened on July 8, 2025, when the Court of Appeals for the Eighth Circuit vacated the FTC's updated Negative Option Rule, finding that the FTC had failed to follow proper rulemaking procedures. So the Click-to-Cancel Rule, as finalized, was struck down. But that's not the end of the story. On January 30 of this year, the FTC submitted an advanced notice of proposed rulemaking to the Office of Information and Regulatory Affairs, signaling its intent to restart the negative option rulemaking process. This move makes clear that the negative options remain a high priority for this commission, and a new rule could be on the horizon.

So let me give a perspective here. The FTC has been interested in negative option and subscription-based programs for years — for decades, actually. And there are many current enforcement actions directly involving negative options. So this is a priority of consumer protection jurisprudence.

So let's move now to this. Even without the Click-to-Cancel Rule in effect, the FTC has not slowed down. The agency has relied on its authority under the Restore Online Shoppers' Confidence Act — known as ROSCA — and Section 5 of the FTC Act to bring a wave of enforcement actions against companies with problematic subscription and cancellation practices. Now, ROSCA prohibits sellers from using internet-based negative option features from charging consumers, unless three conditions are met: First, clear and conspicuous disclosure of all material terms before collecting billing information; second, the consumer's express informed consent before applying any charges; and third, a simple mechanism to stop future recurring charges. Because a violation of ROSCA constitutes a violation of an FTC rule under the FTC Act, the FTC may seek — and courts may impose — consumer redress and civil penalties. So let's look now at some of the major enforcement actions.

The FTC reached a landmark $2.5 billion settlement with a premier brand regarding its membership enrollment and cancellation processes. And in December of 2025, a grocery delivery provider agreed to pay $60 million in refunds to consumers to settle negotiations of deceptive tactics, including false advertising "free delivery" while charging mandatory service fees of up to 15 percent, and failing to clearly disclose terms relating to its membership enrollment. The FTC alleged that the free trial enrollment process did not adequately disclose that consumers would be charged for paid membership at the end of their trial.

FTC Insists on Clear and Conspicuous Disclosures

So there's a common thread running through all of these enforcement actions. It's the FTC's insistence on clear and conspicuous disclosures. What does that mean in practice? It means that before a consumer is enrolled in any subscription or auto-renewal program, all material terms — including pricing, renewal intervals, cancellation rights and any restrictions — must be disclosed in a manner that is easy for consumers to find and understand. And the FTC has been especially focused on user interface design and how disclosures are presented on the screen. Now the FTC has also emphasized channel parity: If enrollment is available online or via a mobile app, cancellation should not be limited to just less accessible methods like calling a phone number or visiting a physical location. The cancellation pathway must be at least as easy as the sign-up method and offered via the same medium.

How Consumers Can Report Problems

Now there are ways in which consumers can report problems. The FTC operates reportfraud.ftc.gov, which is the federal government's website for reporting fraud, scams and bad business practices. Now I want to say this: These submissions to the FTC are shared with other law enforcement agencies through the FTC's Consumer Sentinel Database, and the FTC looks at this data to identify targets for investigations. So I just want to share that with you, so that when you understand that if you or a company you know gets a civil investigative demand or a subpoena, it's likely because of the complaints submitted through this database.

Conclusion

So folks, here is the key takeaway. The FTC is sending a clear message: Companies that offer subscriptions, auto-renewals or any form of recurring billing need to be transparent with consumers from the get-go, obtain genuine informed consent and make it just as easy to cancel as it is to sign up. Even though the formal Click-to-Cancel Rule was vacated by the Eighth Circuit, the FTC's enforcement authority under ROSCA and the FTC Act remains robust, and the agency has restarted its rulemaking process. So for businesses, the takeaway is that compliance cannot wait for a new rule — the FTC is enforcing these principles right now through litigation and investigation.

So please stay tuned to further programs as we identify and address the key issues and developments and provide strategies for success. I wish you continued success and a meaningful day. Thank you.