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.