Automatic Renewals Are a Runaway Freight Train, but Lawsuits Are Fighting Back

Sacramento, CAThe passage of California’s automatic-renewal law in 2010 and the rise in class-action lawsuits that have resulted is indicative of a transition by an increasing number of retailers and service providers to a model that was once the bastion of the magazine industry. And while service providers appear to finally be getting the message that terms need to be communicated to the consumer in a clear and conspicuous manner, more and more consumers are turning to the courts and filing a California Auto-Renewal Lawsuit after getting dinged with charges of which they were unaware of or never agreed to, or so it is alleged.

A classic example of service providers attempting to play fast and loose with California regulations that all agree are thorough and broad in scope, are tactics deployed by a collection of marketers vending skin care products online. According to a complaint lodged by the Federal Trade Commission (FTC), various defendants identified in Automatic Renewal Program lawsuits advertised risk-free trials for skin care products that would be shipped to consumers at a cost that would never exceed $4.95 - in other words, the products appeared to be provided free of charge as a risk-free trial, for just the cost of shipping.

In reality, or so many an Auto-Renewal Subscription Program lawsuit continues to allege, the vendor would debit the consumer’s credit or debit accounts for the actual cost of the products - as much as $97.88 - unless the products were returned within 10 days. Not only is it alleged that consumers were unaware of this requirement, many claim that products arrived so close to the 10-day window, or even after the window had closed, that it would have been impossible to return the products in time, even by courier.

Plaintiffs also were not aware, or so it is alleged, that consumers would be automatically entered into a subscription program that would see a parade of products arriving each month under similar terms.

The California Business and Professions Code Section 17600, et seq., prohibits retailers, vendors and service providers from charging consumers’ accounts without express and explicit consent. Not only that, offers for automatic renewals and continuous service must be stated in a “clear and conspicuous manner” under the law, with large type that contrasts against the remainder of the document so that the consumer’s attention will be called to it. Such offers must also be made, identified and presented before the signature line (not after) and within immediate proximity.

The law is pretty clear.

There are other laws, such as the Restore Online Shoppers’ Confidence Act (ROSCA), a federal statute passed by Congress. The aforementioned skin care products debacle involved a complaint by the FTC that the vendor’s marketing tactics were in violation of ROSCA, the FTC Act and the Electronic Funds Transfer Act, as well as California law. It was alleged that not only did defendants fail to adequately disclose terms that would help consumers avoid the $97.88 fee, a $15 restocking fee on returned items was also alleged to have been disclosed improperly.

With the ease of online commerce, more vendors and service providers are embracing the automatic-renewal model as an easy way to dupe consumers into paying fees they might not notice at all, or are perhaps to busy to fight.

Since the California Auto-Renewal statute was passed, lawsuits have been brought against Google, Apple, Spotify, Lifelock, and Blue Apron amongst other companies, alleging charges have been levied and subscriptions renewed with affirmative consent.

To that end, the number of disgruntled consumers filing an Automatic Renewal Program Lawsuit appears to be on the rise…