Companies that offer automatically renewing or continuing services to California consumers may have additional disclosure, consent, and cancellation-related obligations under an amendment to California's automatic renewal law that goes into effect on July 1, 2018.
Under existing California law, an automatic renewal offer is an agreement between a company and a consumer that automatically renews at the end of the term. A continuous service offer is an agreement between a company and a consumer that remains effective until the consumer cancels the service.1The amendment, California Senate Bill No. 313 (SB 313), expands a service provider's obligations related to both automatic renewal and continuous service offers in several ways:
- Online Cancellation. Existing law requires that the company provide a cost-effective, timely, and easy-to-use mechanism for cancellation. The revised law now requires that any automatic renewal or continuous service offer that is accepted online also must be cancellable online. As of July 1, companies that currently require consumers to cancel an automatic renewal or continuous service offers only by telephone or postal mail must offer an online cancellation option and inform consumers of that online cancellation option.
- Pricing After a Trial Period. Existing law requires clear and conspicuous disclosure of the terms and prices of any automatic renewal or continuous service offer. Under the revised law, if a company's offer includes a free trial period or a trial period at a reduced or discounted price, the company now must include a clear and conspicuous explanation of the prices and terms that will be charged after the trial period ends and must obtain the consumer's affirmative consent to those prices and terms.
- Cancellation After a Trial Period. Existing law requires companies to provide an acknowledgement that consumers can retain that discloses the offer terms, cancellation policy, and information about how to cancel. If the offer includes a free gift or trial, the revised law now requires that the acknowledgement include information on how to cancel before any payment is made (i.e., before the first payment is automatically charged).
Wilson Sonsini follows developments in commercial contracting and applicable laws. For more information about the issue discussed in this alert, please contact Dale Bish, Brian Willen, or any member of the firm's technology transactions practice.