- within Insolvency/Bankruptcy/Re-Structuring and Cannabis & Hemp topic(s)
On July 8, 2025, the U.S. Court of Appeals for the Eighth Circuit vacated the FTC's "click-to-cancel" Negative Option Rule, holding that the FTC violated the FTC Act and the Administrative Procedure Act when it finalized the rule (previously discussed here). The court found that the FTC wrongly determined that the economic effect of the proposed rule would be under $100 million, and accordingly declined to conduct a preliminary regulatory analysis that would have identified alternative approaches. The failure to do this analysis deprived businesses the opportunity for participation in the rulemaking process. Because that procedural error affected the rule as a whole—including the requirement that cancellation mechanisms be as simple as enrollment—the court vacated the rule in its entirety. Although the rule included a severability clause, the court found that partial enforcement was not feasible given the scope of the defect and the prejudice to petitioners.
Putting It Into Practice: A renewed rulemaking effort by the FTC remains on the table though it is unlikely given the FTC's current leadership. However, the FTC can and often does bring enforcement actions to stop automatic renewal practices that are unfair or deceptive under Section 5 of the FTC Act. Companies should take this ruling as a reprieve, not a reset, and continue evaluating their practices under existing federal and state laws, especially as it pertains to dark pattern practices.
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