Finally, the end of subscription traps is in sight. Unless new FTC rule is put on hold

It’s an irony too obvious to avoid writing: a group of big tech firms has sued to put the new “Click-to-Cancel Rule” on hold.

Enough. We should hang up on them.

Maybe I’m just unlucky, but I often pull my smartphone out of my pocket and I’m aghast to see that a pocket click has taken me dangerously close to signing up for a subscription I don’t want — like a weather app, or a monthly food delivery service, or some kind of software “upgrade.”  That’s how easy it is to sign up for something.  My pocket can do it.

Thanks to a new Federal Trade Commission rule, it will soon be just as easy to cancel a subscription as it is to sign up for one. It’s a great idea. If my pocket can sign up, my pocket can cancel.  Fairness restored.  At least, unless federal courts and a few dinosaur industries with deep pockets get in the way.

We’ve all been there — you try to cancel a service and you end up on hold for hours or shuffled off to a chatbot that accidentally disconnects you a few hundred times.  It’s perhaps the most onerous part of Gotcha Capitalism, and I’ve railed against this slimy tactic for the better part of 15 years, since my book was first published. Gotchas, tricks and traps are perhaps the most frustrating part of living in our “modern” economy, killing our bank accounts via death by a thousand cuts, but together, they add up to much more than that. On a grand scale, they are terrible for capitalism and free markets.

We all only have so much money to spend. Keeping consumers’ money tied up in things they don’t want prevents that money from being spent on better things.  These mini-money jails destroy the true workings of capitalism’s rewards design.  Better companies with better products and better customer service deserve our dollars; not companies that design the best consumer traps.

But you know all that. This column isn’t about the virtues of the FTC’s new “click-to-cancel” rule. They are self-evident. It’s really hard to conjure up opposition to this simple idea, though believe me, people are trying. What I really want to rant about today is how long it took to get here. And….we’re not even here yet!

Who remembers this seminal moment in television? I call it the “CANCEL THE ACCOUNT” recording.  A consumer got on the phone attempting to cancel his America Online account and recorded the harassing experience he endured. What a TV spot. Show me don’t tell me, as the expression goes.  I could write a dozen books about this problem. But listen to that desperate man’s increasingly frustrated voice screaming down the line CANCEL THE ACCOUNT…. CANCEL THE ACCOUNT…JUST CANCEL THE ACCOUNT…will make your skin crawl. Because we’ve all been there.

That Today Show segment appeared in 2006!  So long ago that…it involved AOL! And I assure you, the segment landed so hard — not because it was some kind of groundbreaking investigative reporting but — because just about everyone in America had already tried to cancel their AOL account by then. And, no doubt, dozens of other accounts.

So subscription entrapment has been a problem for decades.  Technology does make it worse; it’s now easier than ever for people — and pockets! — to sign up for things.  But the ability to cancel has not kept up with the times. Heck, some cable companies make you show up in person. In truth, many companies use 21st Century tech to take your money, but 19th century tech to give it back.

Lina Khan has done a lot of pro-consumer things at the Federal Trade Commission, and we would all be wise to read up on the progress she has made during her term, because it’s going to be at risk no matter who wins the election this November.  But among this commission’s best improvements has been work on this click-to-cancel rule, which began not long after Khan took her chair in 2021.  In fact, the FTC had begun to work on the topic even earlier, in 2019.  The rule itself was proposed in March 2023.  Thousands of comments about the rule were collected during the rest of that year.  The commissions then revised the rule, removing some elements that industry objected to — such as a requirement to provide occasional reminders of ongoing subscriptions.  And then finally, this month, the rule took effect. Well, not quite. There’s still a six-month grace period.  Mind you, during the two years between the initial publication of the rule and the beginning of enforcement, millions of consumers have been getting dinged $29.99 a month unless they are willing to sit on hold for hours and yell CANCEL THE ACCOUNT to some poor soul who’s job depends on them not canceling accounts.  That’s two more years of ill-gotten gains.

And yet, that’s not enough.  A group of big tech companies sued in federal court this week to stop implementation of the rule. The group includes The Internet & Television Association and the Interactive Advertising Bureau.  It claims the FTC has exceeded its authority in making the rule.

I’m sure very expensive lawyers will work very hard to do all they can to at least delay enforcement, so these companies can continue to ding consumers for a few more months.  Perhaps in the end a federal court will find some twisted legal argument to rule that the FTC Act does not let the nation’s consumer protection agency protect consumers from obviously unfair and deceptive trade practices — even though subscription entrapment is clearly unfair and deceptive.

If you’ve stayed with me this far, I assume you feel a certain sense of exhaustion about all this.  So much of our economy is devoted to tricks, traps and gotchas.  People study how to trap consumers and corner markets in business school. Companies spend billions of dollars researching what words, colors, and images convince you to hand over money you never intended to.  New methods are invented daily, if not hourly.  And the only force which can balance this raging effort to rip off people requires several decades to kick into action.  It’s just not a fair fight.

Free markets require equal participants with equal bargaining power and equal access to information.  We all know that’s not how our markets work today.  Instead, we have Gotcha Capitalism. I have tried to make this critical point since I first began work on that book, so I apologize for repeating myself — truly free markets are good for consumers AND for businesses, especially small businesses. The U.S. economy today rewards bad behavior. Companies are terrified of real competition, and they’ve used process and the court system to delay, delay, delay so they can squeeze out one more quarter of profit, and another quarter, and another. All those efforts block entrepreneurs with good ideas from selling people things they actually want. It’s terrible for our economy.  And it won’t end until someone makes a stand. Support for a simple rule — canceling should be as easy as signing up — is as good a place as any to make a stand.

Sure, there will be unintended consequences.  A company that wants your money might have to wait on hold for a while to reach you and get consent!  Is that unfair? Talk to me in 15 years…