|June 3, 2014|
Previously published on May 28, 2014
The automatic renewal of subscription services has become quite commonplace: typically, companies renew subscribed services and charge credit card numbers maintained on file until the customer cancels the service or either the credit card or the service expires. Companies, customers and even the environment benefit from the ease and efficiency of the automatic renewal process and the reduction of paper subscription renewal bills. Nonetheless, there has been a decided uptick in litigation and regulation relating to automatic-renewal services, primarily in response to consumers complaining that they were not properly informed about, or did not agree to, the automatic renewal policies.
Illinois was one of the first states to regulate automatic renewal; its 2000 Automatic Contract Renewal Act requires companies to disclose automatic renewal of contracts: the disclosure must be in writing if the term of renewal is for 12 months or more.1 Florida, Connecticut, Hawaii, Georgia and North Carolina have since enacted similar laws, and New York and Colorado restrict subscription services in certain contexts.
Oregon and California have perhaps the strictest automatic-renewal laws, requiring that businesses give clear and conspicuous disclosures, obtain affirmative customer consent, and provide cancellation instructions—all before automatically renewing a customer’s subscription.2 Oregon and California also require that companies provide customers with easy-to-use mechanisms for cancellation, such as toll-free telephone numbers, email addresses and (sometimes) mailing addresses. Importantly, the Oregon and California laws deem any automatically renewed product furnished without affirmative consent an “unconditional gift” to the consumer.
These and future cases pose important questions regarding the scope of automatic-renewal laws, including: the scope and extent of available remedies; whether cases qualify for removal to federal court, where Article III of the Constitution could provide barriers to standing; and what forms of disclosure and cancellation will satisfy the statutes. Companies that offer automatic-renewal services, particularly in connection with free trials, should follow these cases closely, while confirming that their practices conform to state law regarding disclosure, consent, and cancellation.
1. 815 ILCS 601/10.
2. Or. Rev. Stat. Ann. § 646A.295 (eff. 2010); Cal. Bus. & Prof. Code § 17600 et seq. (eff. 2010).
3 Bleak v. Spotify USA Inc., N.D. Cal. Case No. 4:13-cv-05653.
4. Kruger v. Hulu, L.L.C., L.A. Super. Ct. Case No. BC540053.
5. Goldman v. Dropbox Inc., N.D. Cal. Case No. 14-cv-01453 CRB.