The FTC’s Negative Option (“Click to Cancel”) Rule Becomes Fully Effective on July 14: Are You Ready?

The totality of the FTC’s Negative Option Rule (the “Rule”), codified at 16 C.F.R. § 425, was slated to go into effect on May 14, 2025 (a portion of the Rule regarding misrepresentations became effective in January). On May 9, the FTC , to July 14, 2025. The cited reason for the deferral was compliance difficulties, though it is not clear how the FTC came up with the 60-day number. 

Of particular note, the FTC stated: “Starting July 14, 2025, regulated entities must be in compliance with the whole of the Rule because the Commission will begin enforcing it. Of course, if that enforcement experience exposes problems with the Rule, the Commission is open to amending the Rule to address any such problems.” Thus, while the FTC has stated its intention to enforce the Rule (which was promulgated under the Biden Administration), the FTC may be receptive to potential amendments in the future. Any amendment, however, would likely have to go through the FTC’s heightened Magnusson-Moss Notice and Comment process, and could take months or years to be implemented.

In December 2024, a number of companies and industry groups had challenged the Rule in various Circuit Courts, alleging that the Rule violated the Administrative Procedure Act. The challenges were consolidated in the Eighth Circuit. The Petitioners had requested a stay pending resolution of the appeal, which was denied in a 2-1 vote. Briefing was completed in early April.

Following the FTC’s May 9 deferral, the Petitioners asked the Eighth Circuit to expedite oral argument. On May 15, the Court did so, scheduling oral argument for June 10. It is possible, although unlikely, that the Eighth Circuit will issue a decision by the July 14 compliance deadline. 

Interestingly, the current FTC is vigorously defending the Rule before the Eighth Circuit, having filed a robust opposition to the challenges and noting its participation at the June 10 oral argument. And FTC Chair Andrew Ferguson, , noted that one of the Commission’s Fiscal Year 2026 priorities will be “halting deceptive billing and cancellation practices.” All of this suggests that enforcement of the Rule may be less partisan than some thought it would be. Notably, Ralph Erickson, one of the Judges on the Panel that will likely decide the Rule’s fate (and a George W. Bush appointee), previously voted that the Rule should not be stayed.

Among other things, the Rule contains key provisions and requirements related to misrepresentations, disclosures, consent, and simple cancellation methods (colloquially referred to as “Click to Cancel”). The Rule has been interpreted by the FTC to apply to both business-to-consumer and business-to-business contracts. Our prior article summarizing the Rule requirements can be found .

Companies should ensure compliance before the July 14 deadline. While there is no private right of action under the Rule, class action litigants may allege violations of the Rule under state laws with borrowing statutes, such as California’s Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. In addition, the FTC (or the Department of Justice, on the FTC’s behalf) can seek civil penalties, injunctive relief, consumer redress and damages pursuant to the FTC Act, 15 U.S.C. §§ 45, 53 and 57b. The maximum civil penalty amount is currently $53,088 per violation.

With state and federal laws and regulations changing, Manatt’s Automatic Renewal Law team is here to help answer questions. To give you a go-to, extensive resource for on-demand answers, we are also developing a comprehensive handbook. If you’d like to be the first to hear about our new handbook, please contact Christine Reilly at , Justin Jones Rodriguez at , or Bezalel Stern at .