Automatic Renewal Programs: Latest Updates

byEllen Traupman BergeAri N. Rothman Shahin O. Rothermel

The laws and regulations surrounding subscription-based offers continue to change on a regular basis. Federal and state regulators and private plaintiffs continue to lodge challenges against companies selling products and services on a recurring basis. Moreover, new cases and law enforcement activity offer evolving interpretations on how to comply. Given the substantial developments, companies offering products or services on an automatically renewing basis should take heed.

The primary federal regulator of autorenewal programs, the Federal Trade Commission (FTC), remains as active as ever in enforcing the Restore Online Shoppers’ Confidence Act (ROSCA), the federal statute governing online negative option programs. The FTC has filed multiple new lawsuits against companies selling products and services on a negative option basis and continues to litigate cases that it has filed.

The district attorneys in the California Automatic Renewal Task Force have also continued to bring actions at a furious pace, demonstrating their clear intention to pick up where the FTC has left off. In fact, the task force recently filed a lawsuit in California state court against Match.com, even though the FTC had already filed a lawsuit against the company. The California district attorneys also announced settlements with Classmates.com, Home Chef, CheckPeople.com, and Care.com, among other companies, and the consent decrees have imposed increasingly stringent requirements on the settling businesses.

State attorneys general are also targeting companies under their respective state statutes. For example, the District of Columbia attorney general alleged that Town Sports International, the parent company of the Washington Sports Club gyms, violated DC’s automatic renewal law by providing inadequate disclosures to consumers prior to enrollment and failing to send customers a renewal reminder.

State legislatures are also hard at work, establishing additional requirements for these programs. Last month, New York’s automatic renewal law went into effect, which requires companies to provide pre- and post-purchase disclosures, obtain customers’ affirmative consent, and provide an easy-to-use cancellation mechanism. The California legislature has also introduced a bill that would amend California’s automatic renewal law to strengthen the law’s protections for trial programs and further simplify the cancellation process.

Meanwhile, private class actions are continuing. A recent case filed against the weight-loss app Noom alleges that the company provided inadequate disclosures prior to consumers’ enrollment and seeks to bring claims on behalf of a nationwide class. Other recent cases provide additional guidance on the content and presentation of disclosures, including the disclosure’s font size and the use of hyperlinks.

Venable has years of experience tracking the legal developments in this space and helping clients develop disclosures and consent, cancellation, and notice mechanisms corresponding to the various laws and prevailing interpretations. We’ve helped clients with compliance counseling advice, consumer terms and conditions, FTC investigations and settlements, state regulatory actions, and private class actions involving subscription programs and automatic renewal laws.

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