IFA Applauds Court Ruling Overturning "Click to Cancel"

The International Franchise Association (IFA) applauded the Eighth Circuit Court of Appeals ruling overturning the Federal Trade Commission's (FTC) Negative Option ("Click to Cancel") Rule, which IFA has advocated against since its inception due to its harms to small businesses, in particular the health, personal wellness, and fitness industries that operate on monthly recurring subscription models, along with their consumers.

"(The) ruling is a win for small businesses, who will not be forced to comply with an overly broad regulation imposed by the FTC without the foresight of its ramifications," said Sarah Davies, IFA general counsel. "The FTC hastily imposed this regulation that will hurt many franchises' business models, make it more burdensome for their customers, and raise costs for all. This unnecessary rule not only disrupted a process that worked for the benefit of both consumers and small business owners but also added another layer of regulatory complexity that small businesses can't afford to navigate."

In franchising, "Click to Cancel" recurring membership-based contracts are used by many fitness centers, massage and personal wellness studios, preventative healthcare providers offering stretching, cryotherapy and other treatments, and children's activities, like adventure parks and sports training, to allow customers to access services on a continuing basis at a competitive rate but cancel according to established cancellation terms. The FTC's Negative Option Rule applied overly broad regulation of all "Click to Cancel" contracts with disregard for the wide-ranging impacts and costs of compliance to franchised small businesses with no notable benefit to the consumer.

On Feb. 26, the IFA Law Center led the filing of an amicus brief, along with the National Association of Spa Franchises and the Health & Fitness Association, in support of vacating the rule, citing the "severe economic and administrative burdens" that their members will face in complying with the Negative Option Rule, which were "disregarded by the FTC, primarily because they refused to conduct the required preliminary regulatory analysis."

In June 2023, IFA submitted comments to the FTC expressing concerns about the proposed amendments to the Negative Option Rule. In January 2024, Davies testified at an informal hearing of the FTC on proposed amendments to the Negative Option Rule.