Websites’ automatic-renewal policies can lead to trouble

Almost anything can be ordered online and accessed immediately or delivered to your doorstep. Having an item shipped monthly, without the hassle of going online and pulling out one’s credit card over and over, is an even better idea. The automatic subscription renewal business model offers customers a convenient and easy way to shop and promotes brand loyalty.

However, amid increasing consumer litigation targeting companies that have adopted the automatic renewal model, companies do well to carefully vet their subscription renewal policies. At least 22 states, including California, have enacted an automatic-renewal law (ARL). Since late 2013, two Southern California plaintiffs’ lawyers have systematically targeted a slew of technology and other companies with subscription-based services under a 2010 California statute (Cal. Bus. & Prof. Code § 17600 et seq.) that prohibits automatic renewal charges without affirmative consent. The suits seek restitution for unauthorized charges, some as low as $1.99 per customer. Plaintiffs’ lawyers claim that under the ARL, retailers must provide restitution to the consumer for 100% of gross revenues received pursuant to the automatic renewal, even if the consumer actually wanted or anticipated the renewal. Though most cases are still in early stages or have been driven into arbitration, this new brand of litigation could become more than a nuisance if it succeeds on a class-wide basis.

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