The Federal Trade Commission and eight states sued Toast (NYSE: TOST) on October 29, accusing the restaurant software and payments company of advertising "$0" hardware and round-the-clock support it did not deliver, charging fees customers never agreed to, and making its subscriptions hard to cancel. The 71-page complaint, filed in the U.S. District Court for the Northern District of California, brings claims under the FTC Act, the Restore Online Shoppers' Confidence Act (ROSCA), a 2010 law on subscriptions sold online, and state consumer protection laws.
Toast said it does not believe ROSCA applies to the contracts it negotiates with restaurants. Whether a consumer subscription law reaches software sold to small businesses matters beyond restaurants.
Colorado, Florida, Illinois, Iowa, Nebraska, Oklahoma and Utah sued through their attorneys general, and California through Los Angeles County and San Francisco. The FTC's commissioners voted 2-0 to sue.
What the complaint alleges
Toast subscriptions start at about $90 per location a month and renew automatically for one- or two-year terms, the complaint says. Among its allegations:
Customers on "$0" Starter Kit plans pay higher card fees, must return the hardware or pay its full retail value if they do not start processing payments within 120 days, and face an $85 monthly inactivity fee.
To cancel, customers must give written notice at least 30 days before a term ends, a rule on page 11 of a 25-page merchant agreement, then reach a phone line open 40 hours a week, weekdays from 9 a.m. to 5 p.m. ET.
Customers who cancel early owe $150 for each month left on the contract. A Toast checkout screen reproduced in the complaint tells Pay-as-you-Go customers they "are not subject to a monthly fee for early termination," though the same screen says Toast "may request the return of hardware" or "seek to recover other costs" if they leave early.
From around September 2021 to late July 2023, Toast added a $0.99 fee to online orders over $10 at some restaurants, kept all of it and has refunded none.
Under an undisclosed term, Toast Capital borrowers who switch point-of-sale providers without permission are treated as in default, exposing them to accelerated loan charges.
The complaint also says Toast billed customers for add-ons without their consent, and that at least "tens of thousands" complained. Plaintiffs seek an injunction, "monetary and other relief" and state penalties, naming no total. The cancellation claims rest on one contrast.
Despite the fact that consumers can enroll in Toast subscriptions online, Toast customers cannot similarly cancel their subscriptions online.Complaint by the FTC and eight states, filed October 29, 2026
Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection, said Toast imposed "hidden fees, unauthorized charges and subscription traps."
What Toast says
Toast replied at 2:12 p.m. ET in a statement on its investor site, saying it would "vigorously defend" itself.
No court has held that ROSCA applies to negotiated business-to-business agreements, and we don't believe it applies here.Toast, in a statement, October 29, 2026
Applying ROSCA that way "has the potential to rewrite the laws of commercial contracts," Toast said, adding that the FTC "disregarded the information we provided showing the extent to which our restaurant customers negotiate their contracts." The company said its service, pricing and support are unchanged.
Toast's August quarterly report disclosed a civil investigative demand in June 2025 seeking information "relative to" the FTC Act, the Gramm-Leach-Bliley Act and ROSCA, then a draft complaint and proposed settlement order from FTC staff in June 2026. Toast disputed "whether certain referenced laws apply to its type of business" and could not estimate a possible loss.
What it means for SaaS companies that sell to small businesses
ROSCA bars charging "any consumer" for a subscription sold online unless the seller clearly discloses all material terms before taking billing information, gets express informed consent before charging, and provides "simple mechanisms" to stop recurring charges. The complaint's three ROSCA counts follow those rules, and the practices behind them can appear in any software contract: automatic renewal, notice windows in a linked agreement, early termination fees, add-ons billed to an account on file.
The complaint also treats sales-led deals as online sales, because those customers sign through DocuSign: "Regardless of the enrollment method, the consumer must either checkout online or must execute order forms online via DocuSign, triggering subscription enrollment."
The Eighth Circuit vacated the FTC's 2024 "click-to-cancel" rule on July 8, 2025, because the agency skipped a required preliminary regulatory analysis; in February the FTC restored the pre-2024 text. A March 13 notice asked whether unfair or deceptive subscription practices are not prevalent in some kinds of deals, giving "B2B transactions between sophisticated business entities" as an example. Comments closed April 13; no proposed rule has appeared in the Federal Register since. The cases have continued.
Date | What happened |
|---|---|
October 16, 2024 | FTC adopts "click-to-cancel" rule |
July 8, 2025 | Eighth Circuit vacates the rule |
September 25, 2025 | Amazon settles Prime case for $2.5B |
December 18, 2025 | Instacart agrees to $60M in refunds |
February 12, 2026 | FTC restores the pre-2024 rule |
March 13, 2026 | FTC asks whether to write a new rule |
May 13, 2026 | Shutterstock settles for $35M |
Source: FTC press releases; Federal Register, 91 FR 6507 and 91 FR 12318.
Shutterstock's case is closest to Toast's fee claims: the FTC alleged its enrollment page often failed to disclose that plans "will automatically renew at the end of each year and that consumers will be charged a fee to cancel" early. The states do not rely on ROSCA alone: each also sues under its own consumer protection law, and Oklahoma's count says its act reaches transactions for "business oriented" purposes.
What happens next
"We are prepared to defend our business and fight this unprecedented action through litigation," Toast said. Its third-quarter results come November 3, after the market closes. On October 28, the day before it sued Toast, the FTC ordered nine companies to explain whether they use personal data to set prices.
Photo license: CC BY 2.0.
