For companies offering subscription-based services, the regulatory landscape is becoming increasingly complex, with recent updates to federal and state laws creating new compliance requirements that demand careful attention and thoughtful collaboration with legal counsel.
Against this backdrop, partner Molly Melcher, counsel Kimberly Culp, and associate Caroline Humphreys walked through important considerations for anyone employing recurring subscriptions during for a webinar in Fenwick’s 2025 CLE series called “New Technologies Employing Old Revenue Strategies: The Risks and Rewards of Recurring Subscriptions.” Here are key considerations they discussed for implementing or updating your recurring subscription services:
The Federal Trade Commission's “click-to-cancel" rule ushers in a new era of subscription management. The FTC's “click-to-cancel" rule, which took effect January 14, 2025, introduces significant changes to how companies must handle subscription cancellations—and can result fines in up to $51,000 per violation.
Broadly, the rule seeks to make cancelling as easy as signing up, including by requiring cancellation be available through the same medium as sign-up. For example, if a customer signs up for a service online, the business cannot require the customer call and speak to a representative to cancel the service. Among other things, the rule also requires express informed consent separate from other transaction elements, and verification of consent must be maintained for at least three years.
Importantly, the FTC rule applies to both B2C and B2B transactions, making it broader in scope than many state laws. Work with counsel to review current subscription flows and ensure compliance across all platforms and user interfaces.
California's enhanced requirements. California's own Click-to-Cancel amendment, effective July 1, 2025, introduces additional requirements that merit special attention. Covered companies must do all of the following:
With California fines up to $2,500 per violation, working with counsel is particularly important if you’re operating in California or selling to California consumers.
Checkboxes can help you check all the boxes. One of the most common questions we get is whether you need a checkbox for subscription terms. While not explicitly required by law, checkboxes can provide strong evidence of express informed consent. The FTC considers checkboxes "presumptively compliant,” though alternative methods can be compliant. While there can be more than one way to effectively obtain consent, the right way to do so for your offering is a context-specific inquiry.
Counsel can help establish proper record-keeping protocols that satisfy both regulatory requirements and potential litigation needs.
Focus on consumer protection and avoid dark patterns. Carefully avoid "dark patterns” in design and user interface, such as elements that make cancellation unnecessarily difficult, use misleading urgency claims, employ emotional manipulation tactics, create excessive confirmation steps, or levy hidden fees or charges.
Working with counsel to review user interfaces can help identify and eliminate potential dark patterns that could trigger regulatory scrutiny or litigation.
Maintain compliance and minimize risk with these best practices:
As subscription services continue to evolve, maintaining compliance with federal and state requirements demands ongoing attention and legal guidance. Regularly review your subscription practices with counsel to ensure they meet current requirements while preparing for future regulatory changes. This proactive approach can help minimize risk while maintaining efficient subscription services that satisfy both business needs and legal requirements.
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