Federal Crackdown Begins on Streaming Services’ Cancellation Policies

It’s about to get easier to cancel your Netflix (or Hulu or Max or Disney+) subscription.

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The Federal Trade Commission on Wednesday finalized a “click to cancel” initiative requiring companies to make it as easy to cancel subscriptions and memberships as it is to sign up. Under the rule, businesses must provide consumers with simple cancellation mechanisms to immediately halt all recurring charges and get their consent to convert auto-renewals and free trials to paid enrollments, among other things. It’s intended to eliminate drawn-out cancellation processes aimed at trapping consumers in unwanted subscriptions.

The rule will take effect in 180 days as streaming services aim to slash customer churn rates, a term that refers to users who momentarily enroll in a service before canceling. Subscriber retention has emerged as a critical figure, with streaming businesses recently turning to pooling together services into bundles to reduce churn.

In a statement, a spokesperson for Netflix said “members can cancel as easily as they can sign up and can cancel online at any time.”

The provision is part of the FTC’s crackdown on deceptive subscription practices. Last year, the agency sued Amazon for allegedly duping consumers into signing up for its Prime service and then impeding them from canceling their enrollment. It claimed that the tech giant adopted a “manipulative” and “coercive” user interface to trick users into enrolling in automatically renewing subscriptions. The suit detailed an intentionally labyrinthine cancellation process requiring users intending to cancel their subscriptions to navigate a four-page, six-click, 15-option cancellation process.

With the new rule, Amazon must provide users the opportunity to cancel their subscriptions with just one click.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said FTC chair Lina M. Khan. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

The Motion Picture Association, in a joint filing with the Entertainment Software Association, opposed some provisions of the rule. It said that the changes are “unworkable in many respects, and its strict requirements will likely hamper industry, while doing little to protect consumers from the minority of bad actors that engage in the most egregious forms of deceptive negative option marketing.”

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Several consumers wrote to the FTC supporting the changes.

“I recently experienced difficulties canceling Spotify and Netflix when I encountered unexpected financial crises,” wrote California resident Mary Warner. “I could easily imagine how others could end up paying for months of unwanted subscriptions just because they could not muster the time, effort, energy and assertiveness required. As it was, I still ended up paying for an extra month — beyond my initial attempt to cancel — with both Spotify and Netflix.”

The rule will also bar companies from forcing consumers to call or chat with a live agent to cancel their subscriptions if they enrolled online. “When my daughter signed up for a ‘free trial’ of Netflix I had to make several phone calls to cancel,” wrote Georgia resident Arlene Anderson. “She signed up online, she should be able to cancel online!”

Subscribers don’t have to talk to a live agent to cancel their subscriptions, according to Netflix, which noted that it hasn’t offered free trials since 2019.

Another company that’s drawn scrutiny for an overly complicated cancellation process is SiriusXM. New York has sued Sirius for training employees to put “subscribers through a lengthy, six-part script” that includes pitching numerous retention offers and to “refuse cancellation” until customers abandon the process.

Oct. 16, 5:44 p.m. Updated with a statement from Netflix.

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