NCTA, US Chamber Challenge FTC's Subscription Renewal Order
The FTC violated the Constitution and exceeded its rulemaking authority when it issued a rule aimed at making it easier for consumers to cancel subscriptions, the U.S. Chamber of Commerce, NCTA, the Interactive Advertising Bureau and other industry groups said in three different lawsuits filed Tuesday in three separate appeals courts.
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Earlier this month, the commission voted 3-2 to publish a final rule modifying its Negative Option Rule, which regulates industry practices surrounding automatic subscription renewals (see 2410160032).
The FCC on Wednesday issued a notice of inquiry examining click-to-cancel requirements for cable, broadband, satellite TV and voice services (see 2410230036).
The U.S. Chamber of Commerce and the Georgia Chamber of Commerce Tuesday filed a lawsuit in the 11th U.S. Circuit Court of Appeals. The same day, the National Federation of Independent Business and the Michigan Press Association submitted the same filing to the 6th U.S. Circuit Court of Appeals. NCTA joined IAB and the Electronic Security Association filed an almost identical lawsuit Wednesday at the 5th U.S. Circuit Court of Appeals (docket 24-60542). Each of the filings argues the FTC’s new rule is “arbitrary, capricious, and an abuse of discretion within the meaning” of one of the FTC’s rulemaking statutes, the Administrative Procedure Act. The rule is “unsupported by substantial evidence,” and the agency “precluded disclosure of disputed material facts which were necessary for fair determination” in the rulemaking process, the groups said. The commission exceeded its statutory authority and violated the Constitution, they said: “Petitioners respectfully request that this Court hold unlawful, vacate, enjoin, and set aside the Final Rule and provide such additional relief as may be appropriate.”
Internet advertising lawyer Richard Newman of Hinch Newman emailed that similar challenges are anticipated.
The FTC declined comment Thursday. In addition, Commissioners Andrew Ferguson and Melissa Holyoak didn't comment Thursday. Holyoak in her dissent against the FTC's final rule raised constitutional issues, saying only Congress has the authority to legislate. As the industry groups argued, she said the commission failed to meet its rulemaking requirements, and questioned whether it will "survive legal challenge.”
The FTC's subscription cancellation rule could be particularly painful for pay-TV services trying to deal with subscriber churn issues and accelerate cord cutting, Ampere Analysis analyst Sam Nursall blogged this week. Traditional pay-TV services are often more difficult to cancel than subscription VOD services, he said. Streamers, meanwhile, might change content strategies and focus on a more churn-happy audience by abandoning a "batch release" of all episodes of a series' season simultaneously -- a practice already in decline, he said.
FCC Chairwoman Jessica Rosenworcel on Wednesday said the agency receives hundreds of thousands of consumer complaints annually, with many raising issues centered on canceling service, unexpected charges and unexplained outages. The FCC "cannot ignore these complaints," she said. Commissioner Brendan Carr said the FCC should leave "cross-cutting consumer protection issues" to the FTC, while calling the NOI a political distraction from more pertinent FCC issues.