The Federal Trade Commission (FTC) recently announced a notice of proposed rulemaking to expand its “Negative Option Rule” to apply to all recurring subscription programs (Proposed Amendment). The Proposed Amendment would have a sweeping effect on recurring subscriptions, requiring—similarly to some state laws—clear and conspicuous disclosure of material terms, double opt-ins for sign-ups, a simple cancellation method, and an annual renewal reminder. If approved, the Proposed Amendment would set a nationwide floor by requiring specific practices for subscriptions, but it would not supplant existing state laws addressing recurring subscriptions. The amendment would also greatly expand the FTC’s ability to seek penalties and consumer redress for violations.
James Snell represents and counsels clients on a wide range of complex commercial matters, including privacy and security, Internet, marketing and intellectual property litigation and matters.
California’s updated automatic renewal law (ARL) took effect on July 1, 2018. We covered these changes in a 2017 client alert, but a reminder is important here because the new law is now “live” and we expect to see more enforcement efforts for alleged noncompliance with the law.
The ARL sets rigid rules about transparency for subscription-based business models where the subscription is automatically renewed, and the subscriber is charged, on a recurring basis (e.g., monthly for a video-on-demand service or beer-of-the-month club). Specifically, such businesses must (1) disclose the automatic renewal offer terms clearly and conspicuously; (2) obtain affirmative consent from the consumer before charging his/her payment method; (3) provide the consumer with an acknowledgement of the automatic renewal terms and cancellation policy in a manner that can be retained for their records (e.g., an email receipt); and (4) notify consumers of any material changes to the automatic renewal terms. The recent changes in the law also now (5) require an online cancellation option for automatic renewal offers that the consumer signed up for online, and (6) clarify that the business must clearly and conspicuously disclose the price that will be charged after a free trial period ends and how and when to cancel before such charge occurs.
Continue Reading Reminder: Updates to the California Automatic Renewal Law Are Now in Effect