A yet to be tested state law in California has given way to an influx of consumer litigation against tech companies with automatically renewing subscription services. The 2010 California statute in question prohibits such automatic renewal charges without affirmative consent from the subscribed party. Along with claims under this statute, alternative claims under various consumer protection laws have been filed against companies such as Google, Microsoft, Spotify, and a host of dating apps, such as Tinder.
The California Business and Professions Code §17600-17606 was created to end the practice of ongoing charging of consumers accounts without the consumers’ express consent. According to the statute, an “automatic renewal” is 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.
In order to be legal, a company must clearly and conspicuously disclose that the subscription agreement will continue until cancelled. As well as, that payments of a certain amount will be charged to the consumer until the cancellation occurs. The statute requires these terms to be conveyed in an apparent manner before the consumer has a chance to affirmatively consent to charges.
In addition, any material changes to an automatic renewal service, including prices or cancellation policy, must also be conveyed with clear and conspicuous notice to the consumer. If a company continues providing goods or services to the consumer without following the instructions of the statute, these goods and services will be treated as unconditional gifts. Subsequently, the consumer shall bear no costs. However, no additional damages are provided for in the statute.
- §17600 has only been brought up in two prior cases. In Williamson v. McAfee, Inc. (Williamson v. McAfee, Inc., 2014 U.S. Dist. LEXIS 117565 (N.D. Cal. Aug. 22, 2014)), the Plaintiff alleged that the Defendant violated the statute by not providing proper notice to consumers about its increase in price for an automatic renewal service. However, this claim was dismissed with an option to amend. As the court found that the Defendant did not materially alter the agreement at any particular point. Rather they immaterially increased prices throughout the duration of the entire agreement. . In Noll v. eBay (Noll v. eBay, Inc., 2013 U.S. Dist. LEXIS 76323 (N.D. Cal. May 30, 2013)), §17600 was never actually litigated. The court decided that the legislature did not intend for non-California residents to be able to bring a claim under the statute. A case brought by a Florida resident this past July against Tinder also had the §17600 claim tossed because the named plaintiff was not a citizen of California. However, the case is proceeding under a secondary cause of action for violation of the California False Advertising Act. The Plaintiff arguing that Tinder advertises itself as a free app. However, it ropes in users by placing limits on usage in the form of swipes, unless a subscription is purchased..
The current cases involving §17600 will be the first time this statute is fully litigated on its merits. The Plaintiffs will argue that the companies did not present their terms clearly and conspicuously. The defendant companies will argue that the statute doesn’t even create a private right of action. So it must be tied to other fraud or false advertising claims. Which usually can not be brought so long as the company gave some warning and a chance for the consumer to signify consent to the terms. Such as marking a check box. No matter the outcome, the scare these suits are providing corporations will surely cause a shift in policy. Heading towards more prudent automatic renewal terms and conditions pages.