CA Renews Auto Renewal Law

Advertising Law

Advertisers, take note: California recently enacted changes to the law governing automatic renewal programs.

Enacted in 2010, the California Automatic Renewal Law (ARL) mandated that companies clearly disclose the material offer terms before a consumer subscribes to an automatic renewal program; obtain affirmative consent to the terms before charging a consumer; and provide a confirmation to the consumer that includes the terms, a description of the cancellation policy, information about how to cancel, and an explanation that consumers may cancel before being charged if they were enrolled in a free trial. They must also provide an easy method for cancellation.

Senate Bill 313 added new disclosure and consent requirements to the ARL.

Now, advertisers must provide “a clear and conspicuous explanation” of the price that will be charged when the free trial program has ended.

Companies must also obtain consumer consent before charging for a time-limited automatic renewal program or one that offers a discounted price, and disclose how consumers can cancel an automatic renewal program prior to paying for the goods and services after a free trial period has ended.

In addition, consumers who signed up for the program online must be provided with a means to cancel their enrollment online.

While the changes increase the obligations for companies offering subscription-based goods or services to California consumers, the law signed by Governor Jerry Brown is actually less burdensome than an earlier proposal. In that version, businesses would have been required to obtain express consumer authorization for the automatic renewal program separately from the original agreement to enroll in a free gift or trial program.

The new law takes effect July 1, 2018.

To read Senate Bill 313, click here.

Why it matters: After the ARL was originally passed in 2010, the statute became a popular choice for consumer class actions. To avoid being subject to a lawsuit pursuant to the amended law, advertisers should familiarize themselves with the changes prior to July 1, 2018.