Companies that offer or are considering subscription-based plans should take note that new requirements for automatic renewal offers (“auto-renewals”) take effect in California on July 1, 2018.  California Senate Bill No. 313 (“SB 313”) amends existing law to extend additional protections to consumers where an auto-renewal offer includes a free gift or trial or where promotional pricing will change once the promotional period ends.  It also requires that certain consumers have the ability to opt-out exclusively online.

The current California auto-renewal law, Section 17602 of the California Business and Professions Code, among other things, requires businesses to:

  • present auto-renewal offer terms in a clear and conspicuous manner;
  • obtain the consumer’s affirmative consent before charging the consumer for an automatic renewal or continuous service;
  • provide an acknowledgment that includes the offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer, as specified;
  • provide a toll-free telephone number, email address, postal address (if the company directly bills the consumer), or “another cost-effective, timely, and easy-to-use mechanism” for cancellation; and
  • provide clear and conspicuous notice of material changes to auto-renewal terms.

SB 313 builds on these requirements.  First, as of July 1, if a consumer accepted an auto-renewal offer online, companies must allow consumers to terminate auto-renewals “exclusively online.”  This opt-out mechanism may include (but is not necessarily limited to) “a termination email formatted and provided by the business that a consumer can send to the business without additional information.”  This new provision prohibits practices such as requiring cancellation by telephone or mail for consumers who accepted the auto-renewal offer online.  In this regard, the new law goes beyond the requirements of the Restore Online Shoppers Confidence Act (“ROSCA”), the federal statute enacted in 2010.

Second, SB 313 amends Section 17602 to require a “clear and conspicuous explanation of the price that will be charged after the trial ends or the manner in which the subscription or purchasing agreement pricing will change upon conclusion of the trial.”  This obligation to disclose future changes in terms also extends to offers involving promotional or discounted prices for a limited period of time.

As with California’s current law, violating the new auto-renewal law may result in civil penalties or class action lawsuits alleging violations of California’s Unfair Competition Law.  Recent class actions involving auto-renewal allegations under California law have resulted in settlements of upwards of $2.5 million.

We will continue to monitor developments in the federal and state auto-renewal arena and will keep you updated here on Inside Privacy.

Tags: Advertising, California
Print:
Email this postTweet this postLike this postShare this post on LinkedIn
Photo of Laura Kim Laura Kim

Laura Kim has a proven track record of successfully resolving clients’ most important consumer protection matters before the FTC, State AGs, and the NAD. She is well-known for her insider knowledge of the FTC as well as her practical approach to accomplishing her…

Laura Kim has a proven track record of successfully resolving clients’ most important consumer protection matters before the FTC, State AGs, and the NAD. She is well-known for her insider knowledge of the FTC as well as her practical approach to accomplishing her clients’ objectives.

As chair of Covington’s Advertising & Consumer Protection Investigations practice group, Laura represents corporate and individual clients in investigations before the FTC and State Attorneys General. She also provides pragmatic compliance advice on a wide range of consumer protection issues, including substantiating claims involving generative artificial intelligence, environmental benefits, and “Made in USA.” She counsels brands on emerging issues involving influencers, consumer reviews, AI-generated content, and subscription autorenewals. Laura regularly represents both challengers and advertisers before the NAD, achieving favorable outcomes in matters involving artificial intelligence, influencers, and claim substantiation.

During her twelve-year tenure at the FTC, Laura served as Assistant Director in two divisions of the Bureau of Consumer Protection, Attorney Advisor to Chairman William E. Kovacic, and Chief of Staff to Bureau Director Jessica Rich. She oversaw major rulemakings—including the Green Guides and the Telemarketing Sales Rule—and supervised dozens of investigations and enforcement actions. As Assistant Director in the Division of Enforcement, Laura also supervised compliance monitoring and enforcement proceedings for companies under federal court or Commission order.

Read more about Laura KimEmail
Show more Show less