Last Friday in a 2-1 order, the Eighth Circuit Court of Appeals rejected an initial challenge to the Federal Trade Commission’s (FTC) Negative Option Rule. The challengers had asked the court to stay the Rule from taking effect pending litigation. The panel of judges included Jane L. Kelly, Ralph R. Erickson, and L. Steven Grasz. Judge Grasz noted he would have granted the challengers’ request for the stay.
The Negative Option Rule’s prohibition on misrepresentations of material facts relating to the promotion or offering for sale of any good or service with a negative option went into effect on January 14, 2025. The Rule’s remaining consent and cancellation requirements are set to take effect May 14, 2025. The court’s action means these implementation dates are unaffected for now. Briefing on the merits of the challenge will be completed in early April, indicating the panel may attempt to rule by the May 14 deadline.
Relatedly, President Trump issued an executive order, “Regulatory Freeze Pending Review,” on January 20, 2025. The order instructs all executive branch departments and agencies to refrain from issuing any rule until an executive official appointed or designated by President Trump reviews and approves the rule. Furthermore, the order directs that all rules pending publication in the Federal Register be withdrawn. Last, it asks that departments and agencies consider postponing the effective date by 60 days and reopening the comment period for any rules that have been published in the Federal Register or “any rules that have been issued in any manner but have not taken effect.”
Since the Negative Option Rule went partially into effect on January 14, 2025, the prohibition on misrepresentation is unlikely to be affected. But since the remainder of the Rule takes effect in May 2025, the order may impact the Rule nevertheless.
Venable's Autorenewal Solutions Team (VAST) guides clients through all phases of automatic renewal programs. VAST continues to track any executive actions that may affect the Negative Option Rule, including by the new FTC chair.