Click-to-cancel mechanisms will likely become an unavoidable legal requirement for publishers and media companies operating subscription products in the U.S., as the Federal Trade Commission seeks to formally mandate that companies “make it as easy for consumers to cancel [subscriptions and trials] as it is to sign up.”
The FTC has been attempting to require click-to-cancel mechanisms for years but, by its own admission, “has only gotten part way to fixing the problem” of sellers making it “hard or impossible” to cancel subscriptions. To remedy that, the commission proposed a formal provision late last month that would require publishers (and other companies selling subscriptions) to offer straightforward self-service cancellation mechanisms. “If you can sign up online, you must be able to cancel on the same website, in the same number of steps,” the commission said.
The public now has until mid-May to comment on the proposal before anything becomes final, but legal experts say they expect it to go into effect regardless of possible objections given the FTC’s concerted effort to crack down on deceptive subscription practices generally.
“We can expect that serious revisions to sellers’ terms and conditions and modifications to purchase processes will be unavoidable in the near future to obtain compliance,” according to Renée Appel, an attorney specializing in marketing and regulatory compliance at law firm Seyfarth Shaw.
The FTC issued an Enforcement Policy Statement in November 2021 stating that companies must offer ways for customers to cancel subscriptions or trials that are “at least as easy to use” as the mechanisms they used to initiate them. Many publishers have opted to interpret that message creatively, however, and continue to require subscribers to engage with online chat functions to make changes to their subscriptions.
Cancellation practices appear to frequently fall short of the FTC’s expectations as a result. When attempting to cancel a subscription to a major global news publication this week, for example, I was required to speak with a customer service representative via phone call or online chat in order to do so. After waiting over 50 minutes to chat online with a representative, the entire process took well over an hour – certainly more than the two minutes and handful of clicks it took me to make my initial purchase.
Legal experts say the FTC’s existing guidance on click-to-cancel mechanisms makes enforcing them difficult to scale since it requires the commission to file individual lawsuits against offending companies. A formal provision will enable the FTC to penalize companies more easily, however, by handing out fines of $50,000 per day for non-compliance, according to FTC chair Lina Khan.
“If adopted, this rule would enable more efficient enforcement. It would create a more
powerful deterrent by introducing the risk of civil penalties,” Khan said in a statement, adding that “The click-to-cancel section of the proposed rule would give companies clear and specific instructions.”
If and when the rule goes into effect, it will have significant implications for publishers that rely on aggressive retention tactics to maintain their subscriber bases and revenues. For some publishers, adding new cancellation mechanisms will require significant alterations to websites, apps, and backend systems, and internal processes and retention approaches — many of which have been carefully optimized over the course of years — will need to be rejiggered.
And then, of course, there is the question of what impact the sudden introduction of click-to-cancel functionality could have on subscriber churn and revenue. While increases in churn might be inevitable, publishers will be reluctant to make sudden changes without strategies and tactics in place designed to prevent a wave of cancellations or opportunistic attempts by subscribers to negotiate lower rates.
Publishers without easy cancellation mechanisms in place should now be preparing to make changes in a deliberate and tactical manner — if and when necessary — rather than being caught flat-footed.