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.

 

Print:
EmailTweetLikeLinkedIn
Photo of Laura Kim Laura Kim

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Ms. Kim…

Laura Kim draws upon her experience in senior positions at the Federal Trade Commission to advise clients across industries on complex advertising, privacy, and data security matters. She provides practical compliance advice and represents clients in FTC and State AG investigations. Ms. Kim advises on a wide range of consumer protection issues, including green claims, influencers, native advertising, claim substantiation, Made in USA claims, children’s privacy, subscription auto-renewal marketing, and other digital advertising matters. In addition, Ms. Kim actively practices before the NAD, including recent successful resolution of matters for both challengers and advertisers. She co-chairs Covington’s Advertising and Consumer Protection Practice Group and participates in the firm’s Internet of Things Initiative.

Ms. Kim re-joined Covington after a twelve-year tenure at the FTC, where she served as Assistant Director in two divisions of the Bureau of Consumer Protection, as well as Chief of Staff in the Bureau of Consumer Protection and Attorney Advisor to former Chairman William E. Kovacic. She worked on key FTC Rules and Guides such as the Green Guides, Jewelry Guides, and the Telemarketing Sales Rule. She supervised these and other rule making proceedings and oversaw dozens of the Commission’s investigations and enforcement actions involving compliance with these rules. Ms. Kim also supervised compliance monitoring for companies under federal court or Commission order.

Ms. Kim also served as Deputy Chief Enforcement Officer at the U.S. Department of Education, where she helped establish a new Enforcement Office within Federal Student Aid. In this role, she managed investigations of higher education institutions and oversaw issuance of fines and adverse actions for institutions in violation of federal student aid regulations. Ms. Kim also supervised the borrower defense to repayment division and the Clery campus safety and security division.