Consumer handcuffs are detrimental to business. The Federal Trade Commission is considering taking action soon to eliminate them. By addressing handcuff agreements, businesses would be required to make canceling a service as simple as signing up for it.
As someone who negotiated deals as in-house counsel, I despised handcuffs. These clauses in contracts allow suppliers or partners to automatically renew deals, making it difficult to cancel. I used to insist on removing these handcuffs and replacing them with a “happy clause” that allowed either party to terminate the contract with 30-days’ notice.
In the consumer world, handcuffs are even more troubling. Companies often make it easy to sign up for a service but extremely challenging to cancel, leading to frustration for customers.
The FTC’s new proposed rule aims to make canceling as easy as signing up, which has faced opposition from some businesses, including cable companies. These companies argue that customers should be informed before canceling, but the reality is that complicating cancellations leads to bad revenue in the long run.
Research shows that customers value ease of cancellation when subscribing to services, indicating the importance of simplifying the process. Businesses need to focus on providing valuable services that customers actually want, rather than relying on tactics to trap them into staying.
Anticipate the FTC to implement a “click to cancel” rule in 2024 and potentially require businesses to notify customers with unused subscriptions. This highlights the importance of enhancing the customer experience, potentially through customizable subscriptions or easier cancellation processes.
Rob Chesnut consults on legal and ethical matters, having previously served as general counsel and chief ethics officer at Airbnb. He brings over a decade of experience as a Justice Department prosecutor.
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