Automatic Renewal Programs

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 (CGI influencers!), changes to automatic renewal laws, and a new slate of FTC Commissioners.

In 2019, we expect significant activity in these areas, plus more activity related to consumer reviews and the Consumer Review Fairness Act.  Further, representatives from the FTC are signaling that the FTC may start seeking more monetary remedies for consumer protection violations moving forward (versus only injunctive relief and ongoing monitoring).  Finally, the growth of the blockchain and digital currencies has raised a number of complex legal issues that companies using the blockchain must navigate, and 2019 will likely bring additional guidance (and challenges) in this area.

For more thoughts on what comes next, see our Hot Ad Law Topics for the New Year.

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