IAB, cable providers sue FTC to cancel Click to Cancel

Several industry associations have banded together to challenge the Federal Trade Commission's Click to Cancel consumer protection rule set to go into effect next year.

The regulation, also referred to as the Negative Option Rule, calls for subscription vendors to make it as simple to cancel something as it is to sign up. It's part of a larger, multi-agency Biden administration push to enact consumer protections that its titled Time Is Money.

Industry groups representing home security tech, cable and internet providers, internet advertisers, the Michigan Press Association, and the National Federation of Independent Businesses all have either filed or joined suits -- some have done both -- in multiple federal district courts to stop the rule.

The various suits allege, among other things, that the FTC overreached its authority in enacting the rule as well as skirted mandatory hearings and comments from the industry as mandated by federal law.

The Internet Advertising Bureau (IAB) claims the FTC didn't do a proper financial impact assessment. By IAB's calculation, compliance will cost the economy at least nine figures overall and has the potential to drive many small businesses bankrupt, said Lartease Tiffith, IAB executive vice president of public policy. Furthermore, the FTC did not address the impact assessment IAB had submitted.

Calling the 230-page rule Click to Cancel is a gross simplification, Tiffith added. In his view, its "cumbersome" requirements would also prevent companies from offering their customers savings and bargain rates to retain them. It also makes it difficult for companies' operations leaders to forecast revenue when customers can more easily cancel and salespeople can't attempt to retain them.

He believes the rule was rushed through without due diligence because it's a presidential election year and that the outcome of the election will not determine the regulation's future.

"This is now in the courts," Tiffith said. "We expect that the courts will determine that we're correct and that the FTC, when it finalized its rule, did so without congressional authorization and in violation of the Constitution."

The FTC argues that the rule is necessary to protect consumers.

"When companies have a business model that is dependent on forcing customers to keep paying against their will, that's a threat to Americans' economic freedom," FTC spokesperson Douglas Farrar said in an email to TechTarget Editorial. "The FTC's rule is plain common sense, and we are prepared to defend this rule in court."

The IAB has a point that that the FTC should have "slowed its roll" and taken more industry feedback into consideration because they understand the underlying tech that would support compliance, said Liz Miller, a Constellation Research analyst. At the same time, it's tough to take a stance against a regulatory law that supports consumers.

Regardless of how the lawsuits turn out, the companies that treat their customers the best -- not making them jump through online hoops or suffer through endless sales pitches before letting them leave -- will end up doing better than companies that don't, Miller said.

The regulation itself should be a wake-up call that consumer and B2B customers don't want companies to waste their time. As shown by the tens of thousands of complaints the FTC receives from customers of fitness centers, cable providers and home security companies each year, there is a major CX problem that needs to be addressed. The problem is that software and processes to control customer churn have become so effective that it actually harms the customer experience, according to Miller.

"[The industry believes that] if we can make it so it's impossible for them to leave and we convince them to stay because they can have six months free, we've done our job. We've managed and mitigated churn," Miller said. "What we haven't looked at is the impact of lifetime customer and what the impact of our overarching customer experience has been. A lot of these situations end up in a drastically negative customer experience, in which any level of cross-sell or upsell is now completely impossible."

Don Fluckinger is a senior news writer for TechTarget Editorial. He covers customer experience, digital experience management and end-user computing. Got a tip? Email him.