Recent Revisions to California Law Substantially Increase Responsibilities and Risks for Trial and Subscription Offers

By Ginny Sanderson
Kronenberger Rosenfeld, LLP

The state of California recently passed amendments to the California Automatic Renewal Law that increase responsibilities and risks for trial and subscription offers promotion.  Given the nature of the requirements, and in the best interests of all partners, Clickbooth will suspend trial nutraceutical marketing in the state of California.

On July 1, 2018, amendments to California’s Automatic Renewal Law (ARL), dramatically increased the compliance requirements for trial and subscription offers made to California consumers. Prior to these changes, the standards generally applied to subscription offers came from The Restore Online Shoppers Confidence Act (“ROSCA”). The California ARL, as revised, is stricter than ROSCA in the following ways:

1. The California ARL has a wider range of enforcement than ROSCA.
The FTC is charged with enforcing ROSCA. 15 U.S.C. § 8404 and private consumers are unable to sue directly under ROSCA. By contrast, “all available civil remedies” are applicable to a violation of the ARL. This means that the Attorney General of California and county district attorneys can prosecute violations of the ARL. It also leaves the door open for individual consumers to sue, including through class action litigation.

2. The California ARL requires subscription billing terms to be made in visual proximity to the “Order” button.
The ARL requires that the subscription billing terms be: (a) provided to the consumer BEFORE the order is completed, and (b) located in visual proximity to the request for consent to the offer (i.e., the “Submit Order” or similar button). Thus, under the ARL, subscription terms conveyed on a separate page, by hyperlink, by pop-up, solely by inclusion in the website’s terms of service, or so low on the checkout page that the consumer must scroll to see them are not compliant.

3. The California ARL requires subscription billing disclosures to be made in large, bolded text that calls attention to itself.
Both ROSCA and the ARL require that subscription billing terms be “clearly and conspicuously” disclosed at the time the consumer provides his or her credit card information. However, the ARL takes it a step further by defining “clear and conspicuous” as meaning: “larger type than the surrounding text, or in contrasting type, font, or color to the surrounding text of the same size, or set off from the surrounding text of the same size by symbols or other marks, in a manner that clearly calls attention to the language.” The bottom line is that, when the page is viewed as a whole, the subscription terms should jump out at the viewer. If they are small in size or unremarkable due to distracting elements on the page, they are not compliant.

4. The California ARL specifically addresses trials.
In addition to regular subscriptions, the ARL regulates trial offers that convert into subscriptions if not cancelled by the consumer within a specific timeframe. The ARL requires the merchant to “allow the consumer to cancel the automatic renewal or continuous service before the consumer pays for the goods or services.” Accordingly, the trial period must be long enough to allow the consumer to receive the product, try the product, and comply with the cancellation procedures before it converts to a subscription.

5. The California ARL requires an Internet-based means of cancellation.
Both the ARL and ROSCA require the means of cancellation to be provided within the subscription billing terms. However, the ARL adds a new requirement—that a consumer who purchases the trial or product online has to be able to cancel the trial or subscription online as well. As such, it is no longer permissible to require California consumers to speak to a customer service representative in order to be able to cancel. Similarly, California consumers cannot be required to jump through any hoops—including returning trial product—in order to cancel.

6. The California ARL requires merchants to provide a copy of the subscription billing terms and cancellation policy to consumers.
The ARL requires that an acknowledgement be provided to the consumer that includes a copy of the subscription terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer. Cal. Bus. & Prof. Code § 17602(a)(3).

Read the full California Automatic Renewal Law

Ginny Sanderson is a partner at Kronenberger Rosenfeld, LLP in San Francisco, which specializes in legal issues specific to Internet advertising. This article is for general information only and is not intended to be and should not be taken as legal advice.

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