Automatic Renewal Programs

In 2016, UrthBox, Inc., a subscription-based service sending monthly snack boxes to customers, had only nine reviews on the Better Business Bureau’s website and all of them were negative. By 2017 UrthBox had 695 BBB reviews, 612 of which were positive.

According to a complaint from the FTC however, the cascade of positive reviews was the result of an incentivized review program. Specifically, in 2017 UrthBox offered to send customers an incentive (a free snack box) in exchange for submitting a positive review for UrthBox on the BBB website. However, the BBB requires customers submitting reviews to affirm they have not been provided any incentive from the business they are reviewing. UrthBox also offered incentives for customers who posted about their products on Twitter, Instagram, Tumblr, and Facebook but, according to the FTC, UrthBox did not monitor or provide instructions to consumers on how to comply with the FTC’s Guidelines on endorsement disclosures. Those Guidelines put the onus on businesses to make sure that customers posting reviews sufficiently disclose any compensation received from the business.
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It’s been a busy year in consumer protection law and during this holiday season, we’re taking stock of the past year and looking ahead to what’s next.  In 2018, we saw many class actions related to pricing practices, scrutiny of Made in USA claims, continued growth in popularity and the evolution of influencers (

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.
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