On May 5th, 2020, the California Assembly Committee on Privacy and Consumer Protection held a hearing and considered AB 2811, a bill that would amend existing California law governing automatic renewals.  As currently drafted, AB 2811 would:

  • require businesses to provide 3-7 days’ notice explaining how to cancel an automatic renewal offer or continuous service offer if the consumer accepted (1) a free gift or trial that lasts for a predetermined period of time as part of an automatic renewal or continuous service offer, or (2) the consumer accepted an automatic renewal or continuous service offer at a discounted price, and the applicability of that price was limited to a predetermined amount of time; and
  • require businesses that permit consumers to accept automatic renewal or continuous service offers online to immediately terminate that service online.

During the hearing, an Assistant District Attorney of Alameda County and a representative of the California Low Income Consumer Coalition delivered testimony in support of the bill. Alameda County noted the importance of consumers being notified about automatic renewals. The California Low Income Consumer Coalition emphasized that as consumers try to cut costs during the pandemic, they need to have clear pathways for discontinuing services.

Several witnesses and advocates, however, raised concerns with the proposed bill– some of which appear to remain in place despite amendments introduced on May 12, 2020. For example, a representative from TechNet voiced appreciation for the intent of the bill but noted that the immediate cancellation provision could be problematic. Assemblymember Kevin Kiley noted that it was anticompetitive to create artificial barriers to exit but voiced his worry that the bill would become a basis for mass litigation. He explicitly requested assurance that there would be safe harbors or some other mechanism by which de minimis violations would not result in massive liability.

Businesses offering free gifts and trials as part of an autorenewal offer may have new requirements to consider in the not-too-distant future.  We will continue to monitor AB 2811 this legislative session, along with the FTC’s ongoing negative option rulemaking.

 

Tags: California, State Legislatures, United States
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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.

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