California automatic renewal

Is California’s Automatic Renewal Law the Next Litigation Cash Cow?

California’s Automatic Renewal Law (“ARL”) saw its most recent amendment take effect on July 1, 2022. As businesses that operate online in California are aware, this state is one of the most consumer-friendly when it comes to protection in the realm of e-Commerce. Over the past year, a litany of complaints has been filed by California plaintiffs under sections of the ARL enacted prior to July 1. Businesses engaged in e-Commerce with California residents need to familiarize themselves and ensure compliance with the latest iteration of the ARL, as class actions for violating the newly-enacted language are sure to follow.

California’s Automatic Renewal Law Before July 1, 2022

The ARL, codified in California’s Business and Professions Code (“BPC”) Sections 17600 – 17606, originally took effect in December 2010. The California legislature passed the ARL in an effort to end the practice of continuously charging consumers for goods or services without their explicit consent. Section 17602, which contains the ARL’s main requirements, makes it unlawful for businesses to:

1) fail to present automatic renewal terms in a “clear and conspicuous manner” before the subscription is agreed to, and in visual proximity to the request for consumer consent;

2) charge the consumer’s credit card, debit card, or account without first obtaining the consumer’s affirmative consent to the agreement containing the auto-renewal provisions; or

3) fail to provide the consumer with an acknowledgement containing the automatic renewal terms and cancellation information in a format that can be retained by the consumer.

Section 17604 explicitly states that violations of the ARL are not a crime. However, the State can still pursue all civil remedies available to it. The language of the ARL is exacting, yet also contains terms that can be broadly interpreted. This, combined with the prevalence of online subscription business models, makes the statute ripe for litigation. Indeed, the past year has seen a proliferation in the number of ARL claims filed by serial litigants. While the ARL does not provide for a private right of action, California’s courts have repeatedly held that plaintiffs can continue to file suit for violations of the ARL as long as their claims are bootstrapped to another statute. This statute is usually California’s Unfair Competition Law.

Under California’s Unfair Competition Law, plaintiffs must allege that they suffered injury-in-fact in order to have standing. To satisfy this requirement, most plaintiffs claim that they were deceived by the business they purchased a subscription from. These plaintiffs claim that they were unaware that they were making a recurring purchase, and, as such, the money paid for their subscription was unfairly taken from them. 

California’s Automatic Renewal Law After July 1, 2022

The July 1, 2022 amendment to the ARL was signed into law on October 4, 2021. This amendment added renewal reminder and cancellation notice requirements to a statute that had already provided the defendant’s bar with enough headache. Under the July 1, 2022 amendment, businesses that enter into a subscription contract with a consumer electronically must now:

1) send a reminder notice between 3 and 21 days prior to the expiration of a free trial or promotional price offer that lasts 31 days or more, or between 15 and 45 days prior if the free trial or promotional price offer lasts 1 year or more; 

2) clearly and conspicuously disclose in the reminder notice that the automatic renewal or continuous service plan will automatically renew unless the consumer cancels; the length of any additional renewal terms; and the methods by which the consumer can cancel the automatic renewal or continuous service plan (accompanied with a link that directs the consumer to the cancellation process or another reasonably accessible electronic cancellation method); and

3) permit the consumer to cancel his/her subscription immediately and at will, “without engaging any further steps that obstruct or delay the consumer’s ability to terminate the automatic renewal or continuous service,” by either a direct link or button in the consumer’s profile, account or device settings, or a pre-formatted email that the user can send without any additional effort or information.

Businesses already in compliance with the ARL prior to its most recent changes may feel well-positioned to defend against the new wave of lawsuits that have followed the July amendment. Just like the original ARL, however, its amendment is also very technical, and again includes terms ripe for deliberation and consequent adjudication. Many businesses engage in promotional pricing or free subscription terms to entice consumers. And almost all subscriptions these days are sold online. This means that any business engaging in e-Commerce with California State consumers must stay vigilant in complying with its automatic renewal law.

Hire Experienced Marketing Attorneys to Comply with the Newest Updates to California’s Automatic Renewal Law

Serial litigants have latched on to California’s Automatic Renewal Law in droves. Thus far, we have seen almost all of these lawsuits filed under the form that the ARL took prior to its most recent amendment. However, that is sure to change, and soon. As such, businesses should be proactive in ensuring compliance with the ARL in its most current form. Hiring experienced counsel to review renewal language could save businesses great expenditure and headache down the road. The attorneys at Klein Moynihan Turco have significant experience in defending businesses against lawsuits filed under the ARL, and assisting them with compliance so that future claims may be prevented.

If you require assistance with California Automatic Renewal Law compliance or related litigation defense, please email us at info@kleinmoynihan.com or call us at (212) 246-0900.

The material contained herein is provided for information purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney.

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Photo by Blake Wisz on Unsplash

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