As followers of this blog know, the auto-renew space has been exceedingly active over the last few years: enforcement actions and guidance from the FTC; enforcement actions by state Attorneys General and local district attorneys; new state laws; changes to existing state laws; and class actions. 2022 is no exception: several new state auto-renew laws have taken effect and more are on the horizon.  It's not a sexy topic but if you're in the subscription business, these are requirements you need to know.

As a reminder, auto-renew programs allow companies to provide goods and services to a consumer on an ongoing basis unless and until she cancels her plan. They are a form of "negative option" program. Prior to cancellation, the marketer considers the consumer to have consented to the new goods and services, as well as the charges for them. Think subscriptions, like that bag of pet food you have delivered every month, the streaming service where you see your favorite shows, the diet app, or that behind-a-payroll publication you have delivered to your in-box every day. Although subscription plans can be very convenient for consumers, they can also be problematic if consumers think they are signing up for a single order rather than for an ongoing program where their credit cards are charged on an ongoing basis.  This has been an area of abuse: hence the upsurge in enforcement and legislative activity.

In the last few years, we've seen new laws (and updates to old ones) enacted in California, New York, Vermont, Illinois, North Dakota and the District of Columbia.  And some of those laws have funky provisions, like DC’s double affirmative consent requirement for certain free trial conversions. Now, Delaware, Colorado, Idaho and Virginia have joined the auto-renew party.  None of the new state laws (or amendments to these states' existing laws) change the regulatory landscape in any dramatic way, but there are few new funky provisions around the country to keep in mind.  (And there a few bills to watch, like in Kentucky and Michigan.)

For example, Colorado’s statute has specific requirements for any online link used to detail information about the auto-renew agreement: the link must be available before purchase, must appear “directly adjacent” to any link used for purchase, and must be labeled with or directly adjacent to a clear and conspicuous disclosure that the consumer is agreeing to an automatically renewing agreement.  The statute also has detailed requirements for cancellation functionality, both online and in physical locations (the latter which is unusual), and (along with Delaware) some special rules for the timing of renewal notices. Idaho also will have special cancellation requirements (effective 1/23) for subscriptions with a term of 12 months or longer. 

Upshot: Needless to say, a close read of the FTC's Enforcement Policy Statement for Negative Option Marketing, issued in the fall, is a good place to start when reviewing your subscription program.  And, not surprisingly, you should keep California top of mind and consider its detailed and many requirements as you design your subscription program functionality (sign up process; notices; cancellation procedure, etc.).  It’s a big state and there are a lot of consumers there. Period. But are you also actively marketing into any particular state or have a lot of customers there?  You should probably take a close look at that state’s requirements for subscription programs too and consider whether there is functionality you can implement for residents of that state, to the extent something special is required. And don’t forget the credit card companies: Mastercard and Visa have rules too, which you should be sure to review with your payment processor.

Most important: always keep the auto-renew mantra in mind; make sure your program is clear, consensual, easy.