Since California enacted its Automatic Purchase Renewals Law (APRL) in 2010, the plaintiffs’ class action bar has been active in suing companies with subscription-based services for their alleged failures to comply with the APRL requirements. The lawsuits stem from the alleged failure to comply with the disclosure, consent, and acknowledgment requirements applicable to many types of subscriptions. Non-compliance has resulted in million-dollar class action settlements and government civil penalties. This summer, the APRL got tougher.
The APRL applies to companies that charge payment cards of California consumers as part of using “automatic renewals” or providing “continuous services.” An “automatic renewal” is an arrangement to automatically renew and charge for a subscription at the end of its term. A “continuous service” is an arrangement where subscription continues and charges are initiated until the consumer cancels the service.
Generally, and even before the amendment, the APRL requirements include:
- Presenting the terms of the automatic renewal offer or continuous service in a clear and conspicuous manner where or when the offer is made.
- Obtaining consumer’s affirmative consent before charging a consumer for the automatic renewal or continuous service.
- Providing an acknowledgment of key terms, including cancellation instructions, to the consumer.
- Implementing a method to cancel (as described in the acknowledgment) by toll-free phone, email, mail, or other “cost-effective, timely, and easy-to-use” method, and permitting consumers to cancel prior to charging at the end of a free trial.
- Notifying the consumer in a clear and conspicuous manner prior to any material changes to the original terms.
For a disclosure to meet the APRL’s “clear and conspicuous” requirements, the law states that the disclosure should (i) use a font style that is distinct from the surrounding text (for example, size, color, font), or (ii) use symbols or marks to call attention to the language.
Changes to California’s APRL
The changes to California’s APRL that went into effect on July 1, 2018, focus on additional requirements for online transactions and offers of free gifts or free or discounted trials.
Online offers and opt-outs. The APRL requires that when a consumer agrees to an automatic renewal or continuous service offer online, the consumer should be able to terminate the agreement using an online mechanism.
Free gifts and trial periods. If an offer includes a free gift or trial, the law states that a company must explain in clear and conspicuous terms, the post-trial price or how the price will change upon conclusion of the trial. In addition, the APRL states that before a consumer can be charged for an automatic renewal or continuous service, the consumer must provide consent to the key terms of the agreement, including terms related to a promotional or discounted price.
California is one of many states that regulate business practices in connection with subscription-based services. The Federal Trade Commission also has the authority to investigate companies for their related business practices under federal law. Plaintiffs’ attorneys and regulators are targeting companies that may not be in full compliance, and that has resulted in substantial monetary settlements and penalties. Companies that rely on subscriptions (both through online or offline transactions) as part of their business should assess whether the California APRL and other state and federal laws may apply to them and take steps to mitigate their risk.