In “More States Eye Laws on Automatic Subscription Renewals,” Communications Daily turned to business litigation partner Mike Daly for insight on the potential impact of more state automatic renewal laws on subscription-based companies.
Daly explained that state interest does not “split along party lines.” He also outlined which states currently have laws while anticipating that “states without such laws will soon be in a distinct minority.” Daly added that states have enacted many laws “in the last few years, and, based on the number of bills that have been introduced recently, we can reasonably expect that many more laws are on the way.” However, he said not to expect Congress to pass another bill soon, especially with current divisions.
Regarding consumers, Daly said they are hurt “by this patchwork of laws in the form of increased prices” from higher operating and legal costs and by less competition “because other businesses may not be willing and able to incur those costs.” While laws may “curb the conduct of a few bad actors, most businesses want to — and work to — comply with the law,” he continued. Due to variations in the law, many businesses “adopt a highest-common-denominator approach to nationwide compliance rather than a state-by-state approach.”
Daly further noted that several laws exempt “certain highly regulated industries.” California’s law exempts businesses that are regulated by various agencies, including the Federal Communications Commission (FCC) and the California Public Utilities Commission. “The scope of some statutes is also tied to the length of the original or renewal terms, which might make certain services beyond their reach,” he stated.
Finally, Daly explained that the California law “has been a significant source of regulatory scrutiny and class action litigation for several years now. Those cases have targeted a broad range of industries, including retailers, technology companies and entertainment enterprises. And they tend to invoke statutory provisions that are ambiguous and have yet to be interpreted by an appellate court.”
Faegre Drinker’s consumer contracts team continuously monitors developments relating to automatic renewal law. Read their latest client alert on automatic renewal laws.