An industry group representing cable and internet providers, along with two other organizations, has taken legal action against the US Federal Trade Commission (FTC) in an effort to block a new rule that requires companies to provide simple cancellation methods for subscriptions.
This lawsuit was filed on Wednesday in the 5th US Circuit Court of Appeals in New Orleans, a court that has a reputation for being friendly to business interests.
NCTA Leads Legal Challenge Against FTC's 'Click to Cancel' Rule
The National Cable and Telecommunications Association (NCTA) is leading this lawsuit, arguing that the "click to cancel" rule exceeds the FTC's authority and is not supported by sufficient evidence.
The rule, finalized on October 16, requires businesses to ensure that the process for canceling subscriptions, auto-renewals, and free trials is at least as straightforward as the process for signing up, according to Reuters.
It also mandates that companies must not force consumers who signed up online or through an app to go through a chatbot or an agent to cancel their subscriptions.
Instead, they must provide straightforward options for cancellation, including the ability to cancel by phone or online for those who signed up in person.
The FTC's decision to implement this rule came after the agency carefully reviewed thousands of comments from various stakeholders, including individuals, consumer advocates, and industry representatives.
Among those who voiced concerns about the rule were the Electronic Security Association and the Interactive Advertising Bureau, who claimed the regulation was overly broad.
The NCTA represents major cable and internet service providers such as Charter Communications, Comcast, and Cox Communications, as well as entertainment companies like Disney and Warner Bros. Discovery. These entities are concerned that the new regulation could significantly impact their business models and how they manage subscriptions.
Consumer Advocacy Groups Sound Alarm Over Lawsuit
Consumer advocacy groups have criticized the lawsuit, suggesting that it is an attempt by large corporations to evade regulations designed to protect consumers.
Liz Zelnick, director of the watchdog group Accountable.US, highlighted the impact of deceptive subscription models, stating that the regulation aims to help consumers who often face difficulties when trying to cancel unwanted subscriptions.
She argued that big companies should not be allowed to undermine efforts to protect consumers from being trapped in recurring payments, said USA Today.
The 5th Circuit is known for its conservative leanings, with 12 of its 17 judges appointed by Republican presidents, including several by former President Donald Trump. This has raised concerns about the potential outcomes of cases brought before this court, particularly those involving regulatory actions by federal agencies.
Past rulings have shown a tendency to favor business interests, as seen in decisions that have restricted the authority of federal agencies like the FTC and the Consumer Financial Protection Bureau.
The FTC's Chair, Lina Khan, expressed strong support for the new rule, asserting that businesses should not complicate the cancellation process for consumers. She stated that too often, people are forced to navigate unnecessary obstacles to stop payments for services they no longer want.
