Prescribing the Entry and Exit: Is Your Business Ready for the Newest Round of Revisions to the California Automatic Renewal Law?

Dec 07 2021

Summary: Effective July 1, 2022, Assembly Bill (“AB”) 390 strengthens protections under the existing California Automatic Renewal Law (“ARL”), which applies to all businesses that make automatic renewal offers and continuous services offers to California consumers.

Key Takeaways: The new law supplements the ARL to ensure that consumers are given the opportunity to cancel automatic renewal and continuous service subscriptions online. Specifically, AB 390 dictates notice requirements prior to automatic renewal dates for businesses selling certain paid automatic renewal plans to California consumers online, and further dictates mechanisms for ease of cancellation.

Effective July 1, 2022, Assembly Bill (“AB”) 390 strengthens protections under the existing California Automatic Renewal Law (“ARL”), which applies to all businesses that make automatic renewal offers and continuous services offers to California consumers.

The new law supplements the ARL to ensure that consumers are given the opportunity to cancel automatic renewal and continuous service subscriptions online. Specifically, AB 390 dictates notice requirements prior to automatic renewal dates for businesses selling certain paid automatic renewal plans to California consumers online, and further dictates mechanisms for ease of cancellation.

Free Gift or Trial

Under AB 390, businesses must now provide a consumer with a notice containing specified information (outlined in more detail below) if the consumer:

accepted a free gift[1] or trial, lasting 31 or more days, that was included in an automatic renewal offer or continuous service offer; or
accepted an automatic renewal offer or continuous service offer at a promotional or discounted price, in which the applicability of that price was more than 31 days.

The notice must be provided at least three days before and at most 21 days before the expiration of the period of time for which the free gift or trial, or promotional or discounted price, applies.

Initial Term of One Year or Longer

AB 390 also requires businesses to send a notice if the consumer accepted an automatic renewal offer or continuous service offer with an initial term of one year or longer that automatically renews for a subsequent term that is longer than one month, unless the consumer cancels the contract.

Notice Requirement

The notice must be provided at least 15 days and not more than 45 days before the automatic renewal offer or continuous service offer renews.

Each notice must:

State that the automatic renewal or continuous service will automatically renew unless the consumer cancels;
State the length and any additional terms of the renewal period;
Provide one or more methods by which a consumer can cancel the automatic renewal or continuous service; and
Provide contact information for the business.

If the notice is sent electronically, the notice shall include either a link that directs the consumer to the cancellation process, or another reasonably accessible electronic method that directs the consumer to the cancellation process if no link exists,

Cancellation

While providing an exclusive online cancellation mechanism for automatic renewal contracts entered into online is nothing new under the ARL, AB 390 removes the previous flexibility afforded to businesses. No longer will providing an email address be sufficient. Beginning in July, businesses must offer either: “(A) prominently located direct link or button which may be located within either a customer account or profile, or within either device or user settings” or “(B) [a]n immediately accessible termination email formatted and provided by the business that a consumer can send to the business without additional information.”

Reaching one step further, AB 390 not only dictates the mechanisms that must be offered, but also addresses any obstructions to a consumer’s cancellation election. Business may not “engag[e] any further steps that obstruct or delay the consumer’s ability to terminate the automatic renewal or continuous service immediately.” Any last minute attempts to entice a consumer to another product or service or confirm an actual desire to cancel is thereby prohibited.

Despite this prohibition, consumer authentication is permitted during the online cancellation election process. However, if a consumer is unwilling or unable to authenticate their account online prior to termination, the business must not preclude the consumer from authenticating or terminating offline using another method.

Preparatory Steps

Businesses offering automatic renewal or continuous subscriptions to California consumers should revisit their consumers’ cancellation path from notice to execution to ensure that it complies with these new, more stringent provisions. This shift also offers an opportunity for businesses to take a critical eye to updating relevant notices, emails, acknowledgment forms, marketing materials, and terms.

While California may still be in the vanguard, it is certainly not the only state addressing automatic renewals. Of note, Colorado and Delaware have recently enacted broad automatic renewal laws coming into effect in January 2022 containing similar notice, content, and cancellation requirements, and, in the case of Delaware, providing for a private right of action.

[1] The regulations specify that “free gift” does not include a free promotional item or gift given by the business that differs from the subscribed product.