Intellectual Property Litigation

NY Law on Auto-Renewal: Helpful or Litigation Breeder?

Many States have passed legislation aiming to regulate websites that offer auto-renewal subscriptions or auto-renew purchase plans with mixed success. NY has decided to jump into the fray with an Auto Renewal Law (ARL) that will go in effect on February 1 2021.

Key points under the new law: Businesses must generally:

  • Present the material terms of the offer – including information about recurring charges, the length of the renewal term, and cancellation policy – in a clear and conspicuous manner and in visual proximity to the request for a consumer’s consent.
  • Obtain affirmative consent to the agreement containing the automatic renewal terms before charging the consumer.
  • Provide an acknowledgement that includes the automatic renewal terms, the cancellation policy, and information on how to cancel in a manner that is capable of being retained by the consumer.
  • Establish an easy-to-use cancellation policy.
  • Provide consumers with notice of material changes, along with information on how to cancel, in a manner that is capable of being retained by the consumer.

This law applies to any site offering auto-renewal whereas a previous NY law only applied to service and maintenance contracts for property (real or personal). NY’s original ARL generally requires that businesses send a renewal reminder between 30 and 15 days before a term expires. Reminders must: (1) be in writing; (2) be served personally or by certified mail; and (3) call the recipient’s attention to the existence of the contract’s automatic renewal provision. NOTE: These provisions remain in effect. If your business was covered under the old law you must comply with both laws.

Now, websites selling everything from wine to prepared food to pornography must comply with the statute. What happens if you don’t comply? The law allows New York’s Attorney General to seek an injunction, and permits courts to impose civil penalties of $100 per violation, or up to $500 per knowing violation. NOTE: the law also provides a good faith defense for businesses whose alleged violations were “not intentional and resulted from a bona fide error made notwithstanding the maintenance of procedures reasonably adopted to avoid such error.” Whatever that means.

With these low fines, though, one wonders if the NYAG will every bring any of these actions. Fear not! Plaintiff class action firms will be sure to jump on board swiftly as they have in other States that have adopted similar language in their ARL law. NOTE: The law does not specifically create a private right of action but it also does not specifically state that the NYAG has exclusive jurisdiction over the area. From past experience with similar laws, one can expect that NY courts will compare this to other consumer protection statutes which do not expressly allow a private citizen to sue but which NY courts have held do nevertheless allow for a private lawsuits.

NY’s law was modeled in California’s ARL statute which has been the subject of repeated class action litigation. For example, class action cases have been brought over what “visual proximity” and “clear and conspicuous” mean., one of the Internet’s most popular and profitable websites, is facing a $250 Million class action lawsuit over not properly informing users that an auto-renewal paid service kicks off once the free trial expires.

I will certainly be advising my e-tail clients to clearly document their attempts to comply with the law by sending these requirements in an email to their IT person/webmaster to make sure there is documentary proof of a good faith effort to comply. That affirmative defense could be vital to save a company hit with a class action lawsuit.

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