California just fired the next shot in the war on automatic renewals of subscription services. And the resulting new law will change the game nationally for consumers and businesses.
How many subscription services are you enrolled in? You probably don’t even know. Chances are that many of the products and services you use every day are paid for with a monthly or annual recurring fee—software, books and news, club memberships, television services, streaming movies, music, and sports.
Businesses love subscription models because they provide a steady, predictable source of income, so they offer enticing free trials and deals to get you signed up. But it’s a reliable source of income in part because it’s so hard to get out of these subscriptions.
Want to quit a service? Good luck. I recently spent over an hour on the phone to cancel a satellite TV service that didn’t offer any way to cancel online—getting transferred from agent to agent and fighting off their vain attempts to keep me.
I strongly suspect that I’m paying for some subscriptions that I haven’t even used for a year or more. It’s so hard to remember what services you’re paying for and so hard to cancel, that there’s now a company that offers to track and cancel these services for you—of course, that’s a paid subscription service too.
It’s been over 18 months since the Federal Trade Commission issued a notice of proposed rulemaking to deal with this issue, but it’s California that has taken the first big regulatory step with a new “click to cancel” law that has ramifications across the country. The law, which goes into effect for paid or free-to-paid subscriptions started or renewed in California after July 1, 2025, requires that the business conspicuously obtain the express affirmative consent of the consumer before enrolling them.
Businesses must also send subscribers an annual reminder about the subscription’s cost and how to cancel, as well as advance notice of changes in the price. Finally, subscription businesses that allow consumers to sign up online must provide a simple prominent link to enable the customer to cancel. It should be as easy to cancel as it is to sign up.
In the short run, this new law will force many businesses to scramble and rethink their product and customer support cancellation process. I have three pieces of advice for companies as they navigate this new regulatory world.
First, don’t think of this as a California problem. If you’ve been short-sighted enough to use cancellation handcuffs as part of your business strategy, it’s time to start thinking big picture and long term. The new California law is just the first in what will be an inevitable wave of regulation on this issue.
Other states have recently joined California in regulating the cancellation practices of subscription businesses, and organizations that have been opposing FTC regulation in this area may soon find themselves looking at an array of different state click-to-cancel laws that will be difficult for their online business to manage. Businesses need a national standard here, and ironically, they may soon be asking the FTC for action.
Second, understand how losing your “ghost users” is going to impact your 2025 numbers. Do you know how many of your users are no longer using your service? These are likely candidates for cancellation in this new world.
Do you understand how making cancellation convenient will impact your short-term revenue numbers? If you’ve been artificially pumping up your subscription numbers with handcuffed customers, you’re now going to have to deal with the hangover. Cancellations may have implications for your numbers, but you may actually be better off encouraging these users to cancel quickly. You’ll get that revenue off your books quickly, rather than deal with the slow leakage that’s coming otherwise.
Finally, click-to-cancel laws may ultimately benefit businesses that offer great products and services. You want to “win” because you offer a better service, not because your handcuffs are better.
Customers may be reluctant to try a new offering because they know from experience that it’s so hard to get out. Once consumers understand the new world and get comfortable that they can easily cancel something, they may be willing to sign up. Lean into that.
Make your cancellation button huge, and market that to new users—“we’re so confident that you’ll love us, we have the biggest cancellation button in the industry.” If your business can monitor user activity, offer to automatically cancel or put on hold subscriptions that go unused for a year.
Do you really want to make money simply because someone doesn’t use your service but forgot they were paying you? Use this moment to ensure your business plan is based on delighting—not handcuffing—customers.
Rob Chesnut consults on legal and ethical issues and was formerly general counsel and chief ethics officer at Airbnb. He spent more than a decade as a Justice Department prosecutor and he writes on in-house, corporate, and ethics issues.
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