Preparing for (more) updates to California’s Automatic Renewal Law
California has passed additional amendments to its Automatic Renewal Law (ARL), which will further strengthen that law’s already stringent requirements and likely present increased class action risk.
These changes coincide with the Federal Trade Commission (FTC)’s long-awaited amendments to its Negative Option Rule, now known colloquially as the “Click to Cancel Rule,” which also imposes new requirements on sellers of subscriptions and similar offerings.
Unlike the Click to Cancel Rule, which applies to both business-to-consumer and business-to-business sales, the ARL is limited to business-to-consumer sales only. However, the ARL’s requirements are nonetheless onerous, and businesses are encouraged to take note.
Key provisions of California’s ARL
Below, we summarize some of the key provisions and upcoming changes to California’s ARL.
Expanded scope of transactions covered: The amendments to the statute clarify that "automatic renewal" includes any "plan, arrangement, or provision of a contract that contains a free-to-pay conversion or in which a paid subscription or purchasing agreement is automatically renewed at the end of a definite term for a subsequent term.” This means that, in addition to automatically renewing subscriptions, any free trial, pilot, or evaluation period that is free for an initial period but automatically converts to a paid subscription must comply with the requirements of the ARL.
Affirmative consent: Consumers’ express affirmative consent to automatic renewal or continuous service offer terms is required. The amendments do not explain how this requirement is intended to differ from the existing requirement to obtain “affirmative consent to the agreement.” However, the FTC Click to Cancel Rule is explicit that consent to the negative option feature (eg, the automatic renewal provision or free-to-paid conversion) must be separate from consent to other aspects of the transaction. As a practical matter, therefore, sellers should ensure that they at least comply with the FTC standard. Additionally, because the ARL requires affirmative consent, a pre-checked box is likely insufficient to evidence consent.
Notice: Businesses must provide consumers with a notice, before confirming the consumer's billing information, disclosing that the sale will automatically renew until the consumer cancels, the length and any additional terms of the renewal period, the amount or range of costs the consumer will be charged, one or more methods by which a consumer can cancel the automatic renewal or continuous service, and more.
“Click to cancel”: Consumers must be able to cancel subscriptions in the same way they signed up or purchased the service or subscription. Requiring consumers to make a phone call to cancel or contact a support center will not be compliant if the consumer purchased the subscription online. Similarly, if a purchase is made by phone, businesses must be available by phone and respond promptly to requests to cancel.
Customer retention: The statute includes specifics on how businesses may convey incentives not to cancel (eg, offering a discount or promotion), disclosures that must be made, and a requirement to act promptly if the consumer persists in wanting to cancel. These provisions differ depending on whether the consumer is canceling online or by phone.
Liability for misrepresentations: The ARL amendments also potentially expand liability for businesses for misrepresentations related to goods or services even if the misrepresentation is unrelated to the auto-renewal terms. Terms such as refund policies, pricing disclosures, and product guarantees or warranties could be the subject of class action liability, so businesses should consider reviewing those terms ahead of time.
Reminders: The days of consumers in California needing to remember when to cancel an annual subscription are over. Businesses must send annual reminders that meet specific requirements, regardless of the duration of the annual renewal term. The reminder must include a description of the product or service that is subject to auto-renewal, the frequency and amount of auto-renewal charges, and a description of how cancellation can be affected.
Going forward
If a business changes the terms of an auto-renewal arrangement, such as changing the price to be charged, the statute requires that businesses provide written notices no less than seven and no more than 30 days before the changes take effect.
These requirements apply to all businesses that sell recurring memberships or other services under subscriptions (eg, print or digital media and streaming services) to consumers located in California, and they apply to all new arrangements entered into or arrangements modified on or after July 1, 2025.
Given these upcoming changes, and the FTC rule that applies to consumers and businesses (see our prior alert on the FTC rule here), businesses with auto-renewal revenue models are encouraged to revisit their contract terms and financial and operational infrastructure to meet these new requirements.
Please contact the authors, a member of DLA Piper’s FTC Consumer Protection team, the Technology and Life Science Transactions and Commercial Contracts team, or your client team to discuss best practices and prepare for compliance with these regulatory requirements.
