On July 1, new requirements under California's automatic renewal will take effect. As we previously blogged, the amendments will require businesses to make it even easier for consumers to cancel and impose new requirements on free trials, promotional offers, and offers with an initial term of one year or longer.
The amendments provide that consumers who enroll in automatic renewals online must be able to cancel online "without engaging in any further steps that obstruct or delay the consumer's ability to terminate the automatic renewal or continuous service immediately." The merchant must provide a method of cancellation that is online in one of the following formats: a prominently located direct link or button, which may be located within either a customer account or profile, or within device or user settings; or by an immediately accessible termination email formatted and provided by the business that a consumer can send to the business without additional information.
Notices must also be provided for free gift offers or certain promotional trials lasting more than 31 days that convert into an automatic renewal. Businesses offering negative option (continuity) programs with an initial term of one year or longer must now provide notice at least 15 days and not more than 45 days before the automatic renewal offer or continuous service offer renews.
California's current automatic renewal law continues to be heavily litigated, and penalties sought by class action plaintiffs remain high. For example, weight-loss app Noom recently entered a $56 million settlement to resolve claims that it enrolled customers into an automatically renewing subscription without clearly and conspicuously disclosing the material terms of the offer, obtaining their affirmative consent, or providing them with an easy-to-use cancellation mechanism. Class action plaintiffs continue to bring these claims with regularity.
Legislation governing automatic renewal programs has also passed in Florida, Idaho, Tennessee, and Virginia. Compliance with state law is critical, but businesses would do well to keep an eye on regulators' activities, including state attorneys general and the California Automatic Renewal Task Force, comprised of California district attorneys.
The Federal Trade Commission (FTC) remains as active as ever in enforcing negative option programs through the Restore Online Shoppers' Confidence Act (ROSCA) and Section 5 of the FTC Act. It continues to target "dark patterns," deceptive design tactics on websites and mobile apps, which it alleges e-commerce companies use to manipulate consumers, particularly in the context of automatic renewal programs. Earlier this month, it called for information to modernize its Dot Com Disclosure Guides, which provide guidance about how merchants must convey the material terms of their negative option programs.
Learn more about dark patterns, updates in autorenewal cases, court decisions, and regulatory activity in this area during our webinar, Dark Patterns: Are They as Shady as Everyone Claims?, on July 19.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
