CLIENT ALERT: Online Marketers, Review Your Enrollment Processes Now: California Enhances Its Automatic Renewal Statute
Online marketing plans and sales arrangements that allow consumers to consent in advance to receive and pay for goods or services in the future on a continuing or periodic basis are convenient and beneficial to both consumers and marketers. While these programs offer consumers the ability to try various programs, in the wake of the booming subscription-based business model, states are enacting or updating their laws to strengthen consumer protection. California’s recently enacted Senate Bill 313 enhances what was already one of the most stringent auto-renewal laws in the nation.
Effective July 1, 2018, the new California Automatic Renewal Law amends Section 17600 of the Business and Professions Code. Among other things, the revised law
- Requires businesses making a continuous service offer that includes a free gift or trial to include in the offer a “clear and conspicuous” explanation of the price that will be charged after the trial ends or the manner in which the pricing will change upon conclusion of the trial;
- Prohibits businesses from charging a consumer’s credit or debit card or third-party account for an automatic renewal without first obtaining the consumer’s consent;
- Requires businesses to disclose how to cancel the continuous service before the consumer pays for the goods or services; and
- Mandates that companies provide an online cancellation mechanism for consumers who accepted the automatic renewal offer or continuous service offer online.
Compliance with the California auto-renewal law is critical for in-state and national advertisers. In addition, a number of California District Attorneys have begun pursuing marketers under the California Auto Renewal Task Force (“CART”) to seek enforcement of California’s laws. California is also notorious for private plaintiff actions. While the ability to pursue a private claim directly under the auto renewal statute is unclear, claims alleging a violation have been allowed to proceed under California’s Unfair Competition Law. Given the current scrutiny of auto-renewal programs, marketers should take the time to re-examine their auto-renewal programs now before the change goes into effect on July 1, 2018.
Please contact the Olshan attorney with whom you regularly work or one of the attorneys listed below if you would like to discuss further or have questions.