If your company utilizes automatic renewals for online subscriptions, the FTC has finalized a rule that may require you to revisit those subscriptions. The FTC has finalized amendments to the Negative Option Rule, now the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs” (the “Rule”). The Rule will go fully into effect on July 14, 2025, and the FTC will begin enforcing it, meaning that as of this date you will need to ensure you are in compliance.

The aim of the Rule is to ensure that consumers are not billed for features they did not wish to pay for because of automatic account renewals. The Rule also seeks to make it easier for customers to cancel automatically renewed memberships. The Rule applies to all negative option programs. “Negative option programs” is a broad term that captures commercial transactions in which sellers interpret a customer’s failure to take an affirmative action, either to reject an offer or cancel an agreement, as assent to be charged for goods or services. The Rule applies to virtually all such negative option programs, no matter whether they take place online, over the phone, or in person. Under the Rule, any negative option programs must adhere to the following:

• Sellers must not make any misrepresentations of any material fact while marketing using negative option features.
• Sellers must provide important information prior to obtaining consumers’ billing information and charging consumers.
• Sellers must obtain consumers’ unambiguously affirmative consent to the negative option feature prior to charging them.
• Sellers must provide consumers with simple cancellation mechanisms to immediately halt all recurring charges.

The Rule does not preempt any state laws governing negative option programs, except to the extent those laws are directly inconsistent with the Rule’s provisions, in which case the Rule governs. For example, marketers in Colorado will still have to adhere to that state’s requirement that negative option sellers send a reminder notice in the twelfth month of a plan, even though this is not part of the FTC’s Rule.

The FTC has clarified that “simple cancellation” means that the method consumers must use to cancel their subscription must be as simple to use—in terms of time, burden, expense—as the mechanism used to enroll in the subscription. However, this does not mean that it has to be the exact same mechanism, so there is still a degree of flexibility here for those offering subscription services. Additionally, the FTC has also clarified that the Rule will apply to business-to-business transactions, not just business-to-consumer transactions.

Businesses offering automatic renewals should consider reviewing their cancellation process to make sure there are no unnecessary hoops for customers to jump through, and ensure that customers explicitly consent to the “negative option feature,”, i.e. the automatic renewal. These businesses may also want to check their state’s requirements which may require more than the FTC’s Rule.

Automatic renewals are a great method for businesses to create regular customers, but businesses will need to be aware that these automatic renewals could come back to hurt them if they don’t comply with the FTC’s Rule.