ESA files petition for review regarding FTC’s click-to-cancel rule

DALLAS—The Electronic Security Association (ESA) announced that on Oct. 22, 2024, it filed a petition for review with the United States Court of Appeals for the Fifth Circuit to block the Federal Trade Commission’s (FTC’s) newly adopted click-to-cancel rule, which allows consumers to cancel subscriptions more easily.

The petition, which ESA filed jointly with the NCTA – The Internet & Television Association and the Interactive Advertising Bureau, seeks an order vacating the FTC’s click-to-cancel rule, which was announced on Oct. 16 and requires sellers to offer subscribers “a way to cancel that’s as quick and easy as it was to sign up,” as stated in a fact sheet provided by the FTC.

According to the FTC, the “click to cancel” rule - officially tabbed the Negative Option rule - helps the commission get money back to people who are misled and addresses common problems. That includes vendors who withhold or distort information, bill customers without consent, or service providers who make it hard - or impossible - to cancel.

“The Final Rule is an attempt to regulate consumer contracts for all companies in all industries and across all sectors of the economy in which the customer purchases a service or subscription that will continue unless the customer exercises the option to cancel,” the petition states. “Petitioners seek review of the order issuing the Final Rule on the grounds that it is arbitrary, capricious, and an abuse of discretion.”

The FTC’s fact sheet states that under its amended Negative Option Rule:

a) Important information must be truthful, clear, and easy to find.

b) People have to know what they’re agreeing to before they sign up.

c) Sellers have to be able to show that people knew what they agreed to before they signed up.

d) There always has to be a way to cancel that’s as quick and easy as it was to sign up.

The FTC noted that the Negative Option rule takes full effect 180 days after publication in the Federal Register.

In response to the FTC’s rule, ESA’s newly elected Chairman, Kevin Stone, stated, “The FTC’s click-to-cancel rule imposes unnecessary and unlawful burdens on America’s electronic security and life safety companies. Auto-renewing subscriptions give residential and commercial customers peace of mind in knowing that their security and life safety services will continue uninterrupted until customers choose to cancel the service.”

He continued, “The click-to-cancel rule makes auto-renewing subscriptions more complicated and expensive, raises concerns of liability, and it will lead to more interrupted service and higher prices for customers. We are proud to go to bat on behalf of our members and customers. We are confident that the courts will set aside the FTC’s click-to-cancel rule.”

Jake Braunger, ESA’s vice president of advocacy and public affairs, added, “We are not a jelly-of-the-month club, or some exotic gym membership hoping to trick consumers and lock them in for a long contract. If a mistake is made in canceling those contracts through a click-to-cancel method everything is fine. If a mistake is made and someone doesn’t know their security and life safety contract was cancelled there could be destruction of property, or even loss of life.”

According to ESA, “Consumers change contact information and payment information quite regularly. They expect their security and life safety systems to continue to serve as a deterrent. If the industry was forced to simply shut off that deterrent with no notice because of the click-to-cancel rule, the consumer would be in an incredibly dangerous position.”