Many time-strapped consumers count on household subscription services to simplify life. One quick purchase agreement with automatically renewing payments, and consumers can receive uninterrupted access to the latest streaming shows, months of lifestyle subscription boxes, or online cloud storage to back up all the family vacation photos. But sometimes consumers aren’t clear on how to unsubscribe or exactly what price they’ll pay after a discounted or free trial period. Thus, many states are enacting or updating their Automatic Renewal Laws (“ARLs”) to ensure consumer protection.
On the heels of increased class action filings under California’s current ARL (see e.g., Kruger v. Hulu; Wahl v. Yahoo! Inc.), the Sunshine State continues to tighten the reins on automatic renewals and continuous service providers with newly enacted Senate Bill 313. California’s expiring ARL was enacted in 2010. It requires auto-renewing consumer contracts to clearly and conspicuously disclose terms, obtain affirmative consumer consent before imposing a charge, and provide an acknowledgment that contains the terms, the cancellation policy, and a simple cancellation method. California’s 2010 ARL was already broader and more specific than the federal Restore Online Shoppers’ Confidence Act, commonly known as ROSCA and enforced by the FTC. (Read more about ROSCA here.)
In addition to its 2010 requirements for automatic renewal, continuous subscription, or free gift or trial payment plans, approved Senate Bill 313 now requires:
- “Clear and conspicuous” explanation of any updates to the price or purchase agreement to be charged after a free gift or trial concludes;
- Affirmative consumer consent to non-discounted pricing prior to billing;
- Disclosure of how to cancel automatic renewal prior to payment for the continuing service after a free gift or trial; and
- An “exclusively online” cancellation mechanism for consumers who originally accepted the service agreement online.
The good news for retailers is that the final law isn’t as stringent as originally intended: The original version required express consumer authorization for the auto-renewal separate from the consumer agreement for the free gift or trial, as well as mandatory notice of the auto-renewal or pricing update a full three days before the new billing takes place.
California’s new law isn’t effective until July 1, 2018, so retailers have time to adapt to the new standards. Change is intimidating, but also provides a healthy incentive to innovate—to evolve marketing tactics, further differentiate brand identity, and highlight a brand’s consumer benefit strategy. By taking these steps while auditing ARL and other compliance, a retailer will be well-positioned to achieve a competitive advantage in the marketplace.