Lobbyists for cable companies and advertisers yesterday expressed their displeasure with a proposed “click-to-cancel” regulation that aims to make it easier for consumers to cancel services.
Federal Trade Commission chair Lina Khan has said that changes are needed because “some businesses too often trick consumers into paying for subscriptions they no longer want or didn't sign up for in the first place.” The FTC proposed the new set of rules in March 2023, and comments from industry groups were taken this week in a hearing presided over by an administrative law judge.
NCTA – The Internet & Television Association, the primary trade group for cable companies like Comcast and Charter, said the rule would make it harder to offer deals to customers who are trying to cancel.
“The proposed simple click-to-cancel mechanism may not be so simple when such practices are involved. A consumer may easily misunderstand the consequences of canceling, and it may be imperative that they learn about better options,” NCTA CEO Michael Powell said at the hearing. For example, a customer “may face difficulty and unintended consequences if they want to cancel only one service in the package,” as “canceling part of a discounted bundle may increase the price for remaining services.”
Powell said that cable company reps can usually talk customers out of canceling. “Out of millions of cancellations, complaints received by NCTA members amount to only a tiny fraction of 1 percent,” he said. “Three out of four of the cable and broadband customers who called to cancel end up retaining some or all service after speaking with an agent.”
Powell worries that retaining customers will become tougher because, he said, the FTC “proposal prevents almost any communication without first obtaining a consumer's unambiguous, affirmative consent. That could disrupt the continuity of important services, choke off helpful information, and forgo potential savings. It certainly raises First Amendment issues.”
Powell also said the cost of complying—including retraining employees and maintaining records for longer than current practice—could force cable companies to raise prices. He claimed that the FTC's estimate of compliance costs is too low.
The FTC said one of its proposed rules “would require businesses to make it at least as easy to cancel a subscription as it was to start it. For example, if you can sign up online, you must be able to cancel on the same website, in the same number of steps.”
Sellers would also have to obtain customer consent before they “pitch additional offers or modifications when a consumer tries to cancel their enrollment,” the FTC said. Before making those pitches, sellers would have to “ask consumers whether they want to hear them. In other words, a seller must take ‘no’ for an answer, and upon hearing ‘no’ must immediately implement the cancellation process.”
The FTC also proposes that sellers be required to “provide an annual reminder to consumers enrolled in negative option programs involving anything other than physical goods, before they are automatically renewed.”
At yesterday's hearing, the FTC also heard from the Interactive Advertising Bureau (IAB), a lobby group for the online advertising industry. “The proposed rule would disrupt the current regime by adding specific requirements dictating what auto-renewal disclosures must say and how they must be presented,” said Lartease Tiffith, the IAB's executive VP for public policy.
Tiffith argued that the rule will burden businesses “and restrict innovation without any corresponding benefit. And as the technology develops, these prescriptive requirements will constrain companies from being able to adapt their offerings to the needs of their customers.”
Tiffith defended auto-renewals generally, saying the practice of automatically renewing services brings “significant benefits to both businesses and consumers in the form of cost savings, convenience, and heightened value.”
Powell claims that complying with the rules would require “rebuilding” cable company systems and that the cost “could easily exceed $100 million for initial implementation by our industry alone.” These costs “would likely lead to higher prices for consumers,” he said.
An FTC Notice of Proposed Rulemaking offered a much different take on the costs, estimating that the “annual labor cost for disclosures for all entities is $4,695,800.” That's based on “an estimated hourly wage rate for sales personnel of $22.15” and an “estimate of 212,000 hours for compliance with the Rule's disclosure requirements.”
The FTC said that non-labor costs for complying with record-keeping and disclosure rules, “such as equipment and office supplies, would be costs borne by sellers in the normal course of business.”
Powell argued that the proposal shouldn't be applied to the cable industry. “The ominously labeled ‘negative option’ feature is merely a plan that continues until the customer cancels,” Powell said. "Most such plans present few concerns … In many industries like ours, automatic renewals are the only model that makes any sense. Consumers expect their internet service to flow reliably and without interruption."
The cable lobbyist contended that consumers are happy with cable company cancellation practices, and that adding the rules to “established processes that are well understood by subscribers will create more confusion, not less.”
“Tens of millions of consumers use our services. They know they are paying for continuing service … and they know how to cancel, rarely complaining about the process,” he said. “The FTC's highly prescriptive proposal requiring numerous disclosures, multiple consents, and specific cancellation mechanisms is a particularly poor fit for our industry.”
Referring to the requirement to obtain consent before offering new deals to customers who are trying to cancel service, Powell said that “placing speed bumps on conversations between consumers and providers will deny them a rightful chance at a better deal and providers a fair opportunity to retain a good customer.”
This story originally appeared on Ars Technica.
