State Laws Navigate Subscription Compliance After FTC Rule Overturn

The landscape of subscription and auto-renewal compliance in the United States has become increasingly complex following the recent nullification of the Federal Trade Commission's (FTC) Negative Option Rule (NOR). This ruling, which was intended to standardize regulations across the nation, has left businesses grappling with a patchwork of state laws that vary significantly in their requirements. This article examines the implications of this regulatory shift, the current state of auto-renewal laws, and the strategies businesses may employ to ensure compliance.

On July 8, 2025, the Eighth Circuit Court of Appeals issued a unanimous decision vacating the FTC's NOR, which had aimed to streamline auto-renewal practices. According to the court's ruling, the FTC failed to conduct a necessary preliminary regulatory analysis, as mandated by Section 22 of the FTC Act, when proposing the rule. This analysis is required when a proposed regulation is expected to have an annual economic impact exceeding $100 million. The failure to provide this analysis deprived stakeholders of the opportunity to comment on the rule's potential economic effects and compliance costs, which were later found to exceed the threshold. The implications of this ruling extend beyond the immediate effects; they highlight the procedural rigor required in federal regulatory processes.

Prior to the FTC's intervention, over 20 states, along with Washington D.C., had established their own auto-renewal laws, each with unique requirements. For example, California’s Automatic Renewal Law (ARL), which has undergone multiple amendments since its inception in 2010, mandates clear disclosures about recurring charges, affirmative consent from consumers, and straightforward cancellation mechanisms. Other states, such as New York and Colorado, have implemented similar provisions but with varying degrees of stringency.

The divergent state regulations create significant challenges for businesses operating on a national scale. According to Bety Javidzad, a Partner at Dentons in Los Angeles, "Navigating these state laws can feel like sailing through rocky waters, where missteps can lead to severe penalties, including class-action lawsuits."

The now-overturned NOR was initially seen as a potential federal solution to these challenges, offering a unified framework for compliance. Following its rejection, businesses are advised to adopt a 'lowest-common-denominator' strategy, ensuring they meet the strictest state requirements to mitigate risks. This approach is crucial for consumer-facing subscription services, which face increased scrutiny from both state regulators and class-action attorneys.

The implications of the Eighth Circuit's ruling extend further, as it may embolden states to enhance their own auto-renewal regulations in the absence of federal guidance. California, for instance, has already updated its ARL to include more comprehensive consumer protection measures. As states reinforce their regulatory beacons, businesses must remain vigilant and proactive in their compliance efforts.

In conclusion, the recent overturning of the FTC's NOR has thrust subscription compliance back into the hands of state lawmakers, creating a challenging environment for businesses. Staying informed about the evolving legal landscape and adopting robust compliance practices will be essential for companies as they navigate this complex regulatory terrain. The best course of action remains to implement clear disclosures, affirmative consent mechanisms, and straightforward cancellation processes, ensuring alignment with the strictest state laws while preparing for potential future regulatory developments.

As legal experts continue to monitor the situation, businesses are encouraged to consult legal counsel to ensure compliance with the shifting regulatory frameworks. Dentons remains committed to providing strategic insights and compliance advice to help businesses chart a forward path in this increasingly complex landscape.