10/16/2024
In a decisive move aimed at protecting consumers, the US Federal Trade Commission (FTC) has introduced new rules that fundamentally change how businesses, including DAZN, must handle subscription services. On Wednesday, the FTC adopted the final version of its “click-to-cancel” rule, which requires companies to make canceling subscriptions as easy as signing up for them. This rule is part of a broader revision to the FTC’s Negative Option Rule, now renamed the Rule Concerning Recurring Subscriptions and Other Negative Option Programs.
The revised rule targets practices that have long frustrated consumers, such as difficult or misleading cancellation processes, confusing enrollment terms, and automatic renewals. The FTC’s goal is to ensure that customers are fully informed and have straightforward ways to withdraw from subscription services without unnecessary hurdles. The rule applies to a wide range of subscription models, including automatic renewals, continuity plans, and free trial offers, across all channels—whether online, by phone, or in person.
Importantly, the rule also extends protections to businesses, meaning that if a company is enrolled in a subscription plan, it receives the same safeguards as an individual consumer. In addition to making it easier to cancel, businesses are now prohibited from making material misrepresentations about their offers and must disclose all material terms—such as costs and cancellation procedures—before asking customers to sign up.
The FTC rule gives businesses up to 180 days to comply, with some provisions going into effect within 60 days. The agency encourages companies to take this time to align with the new standards to avoid civil penalties.
This FTC ruling comes at a time when DAZN, a popular live sports streaming service, is already facing significant legal challenges over its subscription practices. Just last month, DAZN was hit with a class-action lawsuit in California, accusing the company of renewing customer subscriptions without proper consent. The lawsuit, led by Riverside resident Kyle McNair-Robinson, claims that DAZN violated California’s Automatic Renewal Law by failing to disclose renewal terms clearly and by charging customers without obtaining affirmative consent.
The 32-page lawsuit alleges that DAZN unilaterally renews monthly and yearly subscriptions, relying on “consumer confusion and inertia” to boost its revenue. According to the filing, the company has made the cancellation process unnecessarily complex and has failed to adequately inform customers about renewal deadlines or provide an easy mechanism to opt-out.
California’s Automatic Renewal Law requires businesses to present renewal terms in a clear and conspicuous manner and to obtain explicit consent before charging customers. The law also mandates that companies provide an acknowledgment with the terms and a simple way to cancel. DAZN, according to the lawsuit, has consistently fallen short of these requirements, making it difficult for customers to cancel their subscriptions.
The lawsuit also accuses DAZN of using “dark patterns,” manipulative design tactics intended to confuse users and discourage them from canceling. This has led to growing customer dissatisfaction, as seen in numerous online complaints, with consumers frustrated by DAZN’s “deceitful tactics.”
The class-action lawsuit seeks to represent all California residents who incurred renewal fees through DAZN’s services, signaling a wider scrutiny on subscription-based businesses and their compliance with consumer protection laws.
DAZN has also recently come under fire for charging US subscribers a $19.99 pay-per-view price point for an undercard, after previously saying the event would come at no extra cost. The event was headlined by the undisputed light heavyweight title bout between Artur Beterbiev and Dmitry Bivol, a bout that was not available on DAZN. DAZN has yet to explain the reasoning for the change.
With the new FTC rule and ongoing legal actions like the DAZN case, subscription-based companies are under increasing pressure to ensure their practices are transparent and consumer-friendly. DAZN’s challenges reflect a broader issue within the industry: as businesses rely heavily on subscription models for revenue, they must navigate stricter regulations that hold them accountable for fair billing practices.
For DAZN and similar companies, the FTC’s new rule means substantial changes to their operations in the US. Not only will they need to simplify their cancellation processes, but they will also have to ensure that all subscription terms are clearly communicated and that they obtain proper consent from customers before charging them.
Failure to comply with these new rules could lead to significant legal and financial consequences, as illustrated by the ongoing lawsuit against DAZN. This heightened regulatory environment will likely force subscription-based businesses to rethink their strategies and focus more on building trust with their customers rather than exploiting loopholes in renewal practices.
As the FTC continues to crack down on misleading subscription practices, businesses across the US, including DAZN, will need to adapt swiftly to avoid enforcement actions and protect their reputations in the eyes of increasingly wary consumers.
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