Ad industry and entertainment groups sue to block click-to-cancel rule

The news: The Interactive Advertising Bureau (IAB) and two other industry groups are suing the Federal Trade Commission to block proposed “click-to-cancel” rules that would require digital services to let consumers cancel subscriptions via the same method they used to sign up.

• The IAB’s 700 members include streaming providers like Netflix and Amazon, advertising giants Google and Meta, and connected TV platforms like Vizio.
• The Electronic Security Association and the NCTA–Internet and Television Association joined the suit. The NCTA’s members include Disney, pay TV providers Comcast and Charter, and Warner Bros. Discovery, among others.

The lawsuit comes days after the FTC published the final version of its rule, which takes effect 180 days after entering the Federal Register if it proceeds unblocked.

Zooming out: The FTC argues that click-to-cancel rules would benefit consumers, but industry groups claim they would significantly harm businesses that rely on recurring payments.

• Streaming and pay TV service memberships could be affected by the rule. While streaming services typically offer more straightforward cancellation methods than other industries and services, pay TV services like DirecTV often require customers to call a phone number—a method that click-to-cancel would prohibit.
• Last year, the FTC sued Amazon, charging it put up roadblocks to canceling Prime memberships.
• While the rule could decrease recurring revenues for the struggling pay TV industry, “ghost” revenues from users who wish to cancel but are unable to may not represent an accurate indicator of a company’s overall health.

Our take: The upcoming US presidential election, along with recent legal developments, makes the outcome of the click-to-cancel rule uncertain. The US Supreme Court recently overturned Chevron Deference, significantly weakening regulatory agencies like the FTC.

The FTC received numerous comments from consumers supporting the rule and complaining about nebulous cancellation policies for a range of services including Spotify and Netflix, suggesting brands could benefit from increasing consumer transparency.