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Diet and Wellness Giant Fails To Cancel California Autorenewal Class Action

A federal district court recently found that a large diet and wellness company likely violated California’s Automatic Renewal Law by failing to send consumers confirmation emails that included specific instructions about how to cancel their subscription memberships. The court therefore denied, in part, the company’s motion to dismiss a class action lawsuit.
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As this case demonstrates:

  • Many state automatic renewal statutes impose detailed requirements on consumer automatic renewal agreements, such as the inclusion of specific information in confirmation emails; and
  • Failure to consider the specific requirements in each state’s automatic renewal statutes can result in legal worries for companies relying on automatic renewal agreements.

Under California’s Automatic Renewal Law (the “ARL”), it is unlawful for a business that enrolls consumers in subscription or membership plans that automatically renew to:

  1. Fail to present the automatic renewal offer terms or continuous service offer terms in a clear and conspicuous manner before the subscription or purchasing agreement is fulfilled and in visual proximity to the request for consent to the offer;
  2. Charge the consumer’s credit or debit card for an automatic renewal or continuous service without first obtaining the consumer’s affirmative consent to the agreement; or
  3. Fail to provide an acknowledgment that includes the automatic renewal offer terms or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer.

In this case, the court concluded that the company provided adequate initial disclosures before charging and enrolling consumers, but that its “acknowledgement” email was inadequate. After consumers enrolled in a membership, they received a confirmation email from the company that disclosed how much they would be charged and advised the consumer that their “subscription will be automatically renewed at the end of [the] payment plan at the standard monthly rate.” The email also informed consumers that “instructions on how to cancel are located in the Help section of the [company’s] site.” It was this latter sentence that the court took issue with. Specifically, it noted that there was no hyperlink to the “Help” section of company’s website, and that the company provided no summary of, or clear means of accessing, the cancellation policy within the acknowledgement email. As of August 2021, the case is still ongoing.

Renewal programs that automatically charge consumers on a recurring basis, including streaming services, monthly delivery services, and club memberships, are strictly regulated at both the state and federal levels. And the number of states with strict automatic renewal laws is growing: Colorado recently adopted a law that requires companies to send a written confirmation email with specific cancellation instructions and that (subject to some exceptions) requires companies to notify consumers at least 25 days, but not more than 40 days, before each automatic renewal. Failure to strictly adhere to those requirements can lead to regulatory enforcement and class action litigation.

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