US Court nullifies FTC requirement for click-to-cancel

Did you read the article? "Procedures weren't followed."

Seems like an almost intentional mistake tbh

Yeah not a great article. "failed to follow required procedures under the FTC Act during the rule-making process" but no real details on what the procedures require that the commission did not do.

A trivial search will get you the court opinion itself <https://ecf.ca8.uscourts.gov/opndir/25/07/243137P.pdf>, so regardless of how bad the news article is you should not be uninformed.

From the abstract:

    …the Commission failed to follow procedural requirements under § 22 of the Federal Trade Commission Act (“FTC Act”), 15 U.S.C. § 57b-3(b)(1)

A more detailed explanation:

    The Commission’s formal rulemaking authority is found in § 18 of the FTC
    Act. Section 18 authorizes the Commission to adopt “rules which define with
    specificity acts or practices which are unfair or deceptive acts or practices in or
    affecting commerce” within the meaning of § 5, as well as “requirements prescribed
    for the purpose of preventing such acts or practices.” 15 U.S.C. § 57a(a)(1)(B)
    (emphasis added).
    
    …
    
    Besides the specificity and prevalence requirements, § 18 requires a number
    of procedural steps, some of which go beyond those required for APA notice-and-
    comment rulemaking. The FTC must first publish an “advance notice of proposed
    rulemaking” containing “a brief description of the area of inquiry under
    consideration, the objectives which the Commission seeks to achieve, and possible
    regulatory alternatives under consideration.” 15 U.S.C. § 57a(b)(2)(A). Also
    required is a notice of proposed rulemaking “stating with particularity the text of the
    rule, including any alternatives, which the Commission proposes to promulgate, and
    the reason for the proposed rule.” Id. § 57a(b)(1)(A). Interested parties must be
    afforded the opportunity for “an informal hearing” and to “to submit written data,
    views, and arguments” on the proposed rule. Id. § 57a(b)(1)(B)-(C), (c).
    
    Congress further required the Commission to conduct regulatory analyses of
    proposed and final rules, or amendments to rules, at two stages of the rulemaking
    process. First, when the Commission publishes a notice of proposed rulemaking, it
    also must issue a “preliminary regulatory analysis” containing “a description of any
    reasonable alternatives to the proposed rule which may accomplish the stated
    objective of the rule” and for the proposed rule and each alternative, “a preliminary
    analysis of the projected benefits and any adverse economic effects and any other
    effects, and of the effectiveness of the proposed rule and each alternative in meeting
    the stated objectives of the proposed rule.” 15 U.S.C. § 57b-3(b)(1)(B)-(C).
    
    Second, the Commission must issue a “final regulatory analysis” when it
    promulgates a final rule. 15 U.S.C. § 57b-3(b)(2). Similar to the preliminary
    regulatory analysis, the final regulatory analysis must include a description of
    alternatives considered by the Commission and an analysis of projected benefits and
    adverse economic and other effects. The Commission must also provide “an
    explanation of the reasons for the determination of the Commission that the final rule
    will attain its objectives” and a “summary of any significant issues raised by the
    comments submitted . . . in response to the preliminary regulatory analysis.” Id.
    § 57b-3(b)(2)(B)-(E). Importantly, the preliminary and final regulatory analysis
    requirements do not apply to “any amendment to a rule” unless the FTC estimates that
    the amendment “will have an annual effect on the national economy of $100,000,000
    or more.” Id. § 57b-3(a)(1)(A).

Notice all of the steps. “advance notice of proposed rulemaking”, “notice of proposed rulemaking”, “preliminary regulatory analysis”, “an informal hearing” plus the ability of concerned parties “to submit written data, views, and arguments” to the FTC, and a “final regulatory analysis”. The court draws our attention to the fact that the FTC never did either of the regulatory analysis steps, and points out that they are required.

The FTC had opted out of doing those analyses on the basis that the new rule would have an annual impact of less than a hundred million dollars. The court however notes that this is quite unlikely:

    Based on the FTC’s estimate that 106,000 entities currently offer
    negative option features and estimated average hourly rates for professionals such as
    lawyers, website developers, and data scientists whose services would be required by
    many businesses to comply with the new requirements, the ALJ observed that unless
    each business used fewer than twenty-three hours of professional services at the
    lowest end of the spectrum of estimated hourly rates, the Rule’s compliance costs
    would exceed $100 million. Such an estimate was “clearly unrealistically low
    inasmuch as there are several new requirements proposed that would require changes
    in existing practices and/or disclosure forms.”

Thus the FTC erred when it skipped these steps. The remedy is to vacate:

    Section 18 of the FTC Act directs that a reviewing court “shall
    hold unlawful and set aside the rule” if it finds agency action to be “without
    observance of procedure required by law.” 15 U.S.C. § 57a(e)(3); 5 U.S.C.
    § 706(2)(D). “The ordinary practice is to vacate unlawful agency action.” United
    Steel v. Mine Safety & Health Admin., 925 F.3d 1279, 1287 (D.C. Cir. 2019).

This doesn’t mean that the rule is unconstitutional, just that the FTC has to actually do things correctly. The court hasn’t ruled on the law itself because it is moot.

Thanks for the analysis.

Gotta laugh at the threshold being USD100M costs to the affected businesses without the law taking into account how much the annual costs to consumers are, assuming the continuation of the practices.

Why is that laughable? Congress decided that all rules changes need additional scrutiny if they impose large costs. After all, those costs are eventually going to be passed down to consumers so making overly–complicated rules just ends up hurting consumers. And there has to be _some_ threshold number; they couldn’t just leave that one undefined or nobody would ever bother with the extra steps.

What makes me laugh (sardonically) is that I would have hoped that, as well as considering what the costs are to the suppliers, the law might also have taken into account the size of the injury being suffered by consumers. And that if that injury was large enough then that problem should override concern the cost to the companies that have chosen to use sharp practices in maintaining their revenue flow.

Maybe you saw something in the quoted text that I didn't but I understood the USD100M to mean the costs that would arise due to companies who are currently utilising these practices stopping those practices. There's not an ongoing cost to those companies unless you call the deprivation to them of the revenue they shouldn't be receiving because their customers no longer wish to buy the service a cost.

> After all, those costs are eventually going to be passed down to consumers

And when they are the consumers will be able to stop buying off those companies, well, I mean, as long as they can cancel their subscription.