Changes that affect subscription termination, notice-details take effect
Don't Mess With the West
The Golden State has made some news recently as a thorn in the side of the Trump administration. California has launched more than 20 lawsuits against the president and his administration, on topics as diverse as DACA, the travel ban, the transgender military ban, healthcare, environmental regulations and energy efficiency standards.
And California has the weight to throw down: As the most populous state, and the fifth-largest economy on Earth, the decisions of its government and regulatory apparatus have outsize effects on the out-of-state businesses that want to peddle their wares and services there.
An example of the Golden State holding business to a higher standard than federal law, or the laws of sister states, is California Senate Bill 313, revising Business and Professions Code 17602, which as we have previously reported adds to existing state legislation regarding auto-renewal offers. While the law passed and was signed by the governor back in September 2017, it is just now going into effect.
The Takeaway
Effective July 1, 2018, Bill 313 imposes new restrictions on auto-renewal operations that offer a free gift or a trial period, regarding an explanation of the temporal nature of that initial offer and the differing terms of the renewal, and regarding renewal termination requirements for online offers. Businesses that offer such a deal are required "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 subscription or purchasing agreement pricing will change upon conclusion of the trial." Consumers must also be notified about how to cancel a free gift or free-trial auto-renewal offer before they are charged for the product or service, and they must affirmatively consent to the terms and conditions before their credit card is charged.
There was already a requirement for an "easy-to-use mechanism for cancellation" (e.g., a toll-free number) that is clearly and conspicuously disclosed as part of the original offer and in the terms. Now, the California law also requires businesses offering auto-renewal services to allow customers who accepted their offer online to cancel it "exclusively online." This "may include a termination email formatted and provided by the business that a consumer can send to the business without additional information." This provision seems to be aimed at businesses that make canceling difficult by requiring online adopters to switch to a different medium – phone or post – to cancel their service.
This last provision extends coverage mandated by the federal Restore Online Shoppers' Confidence Act. Companies doing business in California should be aware of these changes, which are likely to have an impact on the country as a whole.
Unchanged is the requirement that the seller must provide the customer an acknowledgment of the renewal terms, cancellation policy and methods of cancellation in a manner that is capable of being retained by the consumer (e.g., an email), and a notice of any change in terms. The revised law, however, clarifies that notice of changes in terms must be given before the changes go into effect.
Companies that offer free trials and auto-renewal programs in California should review disclosures, terms and procedures to ensure compliance with these revised requirements. California often is a trend-setter, and other states may follow suit by implementing similar or even more restrictive regulations. Regardless, national advertisers and retailers will be subject to the California standard. "As goes California, so follows the nation."
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