11.24.2010
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Updates
If your business provides automatically renewed or continuous subscriptions for services such as online games, online or print publications, or other subscription content, then you will need to tailor your service offers to California residents to meet the requirements of California Senate Bill 340 ("SB 340") by December 2010.
On December 1, 2010, SB 340 will take effect, imposing rigorous information, notice and consent requirements on businesses (the "Offeror" or "Offerors") that make automatic renewal or continuous service offers to California residents. Under the new law, Offerors will be required to take certain actions with respect to making offers, charging consumers for their services and providing information about the services.
Summary of the New Law
SB 340 defines automatic renewal and continuous service offers and dictates how Offerors may conduct their business, including the procedures that Offerors must follow to comply with the law. An automatic renewal offer is an offer for a plan or arrangement in which a paid subscription or purchasing agreement is automatically renewed at the end of a definite term for a subsequent term. A continuous service offer is an offer for a plan or arrangement in which a subscription or purchasing agreement continues until the consumer cancels the service.
After December 1, 2010, Offerors will be required to present the offer terms in a "clear and conspicuous" manner. To be clear and conspicuous, the terms must be in larger type than the surrounding text, in a type or color that is in contrast to the surrounding text or set off from the surrounding text in a manner that clearly calls attention to the language.
Offerors also may not charge the consumer's credit card without affirmative consent from the consumer and must provide an acknowledgment of that consent in a form that is "capable of being retained" by the consumer. This acknowledgment must detail the offer terms, the cancellation policy and how to cancel the automatic renewal or continuous service.
Further, when an Offeror makes a material change to the terms of an automatic renewal or continuous service offer that has already been accepted, it must give the consumer "clear and conspicuous" notice of the change in a form that is "capable of being retained" by the consumer. The notice of material changes must also include information about how to cancel the service.
Finally, if an Offeror sends goods, wares, merchandise or products to a consumer under an automatic renewal of a purchase or continuous service agreement without first obtaining the consumer's affirmative consent, the goods, wares, merchandise or products are deemed unconditional gifts to the consumer and the Offeror must bear their entire cost.
The bill is set to take effect on December 1, 2010. If your business provides automatically renewed or continuous subscriptions for services, then you may want to tailor your offers to California residents to reflect the requirements in the new law. Below are three quick tips for updating your offer procedures to comply with some of SB 340's more complicated provisions.
| If you make electronic offers or allow consumers to subscribe to your service online, display the written automatic renewal or continuous service offer terms, not simply a link to the terms, in visual proximity to the request for consent. When an Offeror makes an automatic renewal or continuous service offer, it must provide the offer terms to the consumer "clearly and conspicuously" and in visual proximity to the request for consent to the offer. This means the actual offer terms, not simply a link to the terms, must be separated by size, type or color or otherwise set off from the surrounding text and must be in visual proximity to the request for consent. Consider clearly marking the offer terms and placing them above the request for consent so that the consumer sees them before consenting to the offer. |
| Provide email or regular mail acknowledgment of consent to the offer terms that includes the automatic renewal or continuous service offer terms, cancellation policy and information about how to cancel. Under SB 340, after the consumer has consented to the automatic renewal or continuous service offer, the Offeror must acknowledge that consent in a form that is "capable of being retained" by the consumer. The acknowledgment must contain the offer terms consented to, the cancellation policy and information about how to cancel. Consider providing this information in either a clearly titled email or regular mailing. Also consider including subject line or introductory language advising the consumer that the email or regular mailing is an acknowledgment of consent containing details about automatic renewal and cancellation and should be retained for reference and for information about how to cancel. |
| Use an email or regular mailing with clear headings and easily understandable language to notify customers of changes and describe what the changes entail. Under SB 340, an Offeror must give consumers notice of material changes to the terms of the automatic renewal or continuous service offer before the change is made. The notice must be "clear and conspicuous," be in a form "capable of being retained" by the consumer and include information about how to cancel. Consider sending consumers a clearly titled email or regular mailing containing the notice of material changes and information about how to cancel written in easily understandable language. Also consider including subject line or introductory language advising the consumer that the email or regular mailing is a notice of material change and should be retained for reference and for information about how to cancel. |
Through SB 340, California seeks to protect consumers from unwittingly being charged for automatic renewal or continuous services. Giving consumers proper notice of terms and changes is important to ensure that your automatic renewal or continuous service offer model fulfills California's consumer protection goals.
© 2010 Perkins Coie LLP
