On July 1, 2018, California’s subscription auto-renewal law is about to change in a couple of important ways. This law applies to e-commerce vendors who sell to consumers on a subscription basis, where the subscription renews automatically. For example, companies that offer subscription box services are generally subject to this law. Under the law as it currently stands, vendors must disclose the terms of the automatic renewal policy in a clear and conspicuous manner at the time of the original purchase, get the consumer’s affirmative consent before charging the consumer, and explain how to cancel the subscription.
Beginning July 1, vendors will have to allow online cancellation if the subscription was originally commenced online. Such vendors cannot require that their customers use phone or snail-mail to cancel. Also, if the subscription offer includes a free gift, trial subscription, or promotional pricing, vendors must notify consumers how to cancel before they are charged (or before the promotional pricing expires and they are charged full price). Vendors must explain the price to be charged when the promotion or free trial ends. If the initial offer is at a promotional price that will increase later, the vendor must obtain the consumer’s consent to the non-discounted price prior to billing.
Auto-renewing subscriptions have been fertile ground for California class action attorneys, who have made a cottage industry out of shaking down vendors that fail to comply with the state law. Consequently, it’s important for any company whose business model is based on consumer subscriptions that renew automatically to update their terms of service and selling processes before the new law takes effect. It doesn’t matter if the company isn’t based in California, either – the law applies if the consumer is a resident of California. Finally, keep in mind that more than half of US states have a law dealing with auto-renewing subscriptions.