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National Auto Dealers Association (NADA)Jul 10, 2025 1:57:15 PM1 min read

Court Overturns FTC Negative Option Rule

Court Overturns FTC Negative Option Rule
1:45

On July 8, the U.S. Court of Appeals for the Eighth Circuit overturned the Federal Trade Commission (“FTC”) Negative Option Rule. The rule would have required contracts with certain auto-renewal and similar features to have specific disclosure and cancellation requirements. The opinion vacates the rule in its entirety and nationwide.

PARTNER SPOTLIGHT

The Court held that the FTC missed a significant procedural step by not proposing regulatory alternatives in the Notice of Proposed Rulemaking that would have allowed interested parties to comment.

The Court cited NADA’s recent Fifth Circuit decision challenging the Vehicle Shopping Rule as precedent to overturn the rule. The Court emphasized that the opportunity to be heard earlier in the rulemaking process was not harmless error and could have impacted the FTC’s decision on issuing the final rule. 

The rule was set to go into effect on July 14. The rule was originally set to take effect on May 14, but the FTC delayed implementation by 60 days.

Dealerships offering contracts with automatic renewals, free to pay, or fee to pay conversion (a consumer receives goods or services for free or a nominal fee for a trial period and is charged a fee after a trial period unless they affirmatively cancel) would have had to comply with the rule. 

The rule was finalized under the last administration, but the current administration has continued to defend the rule. The FTC has not stated whether it will appeal the Court’s decision. Since the rule was overturned on procedural grounds, the FTC could begin a new rulemaking process. However, that seems unlikely under this administration. Dealers should also consult state autorenewal laws in connection with subscription services. 

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National Auto Dealers Association (NADA)

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