As a law firm with a focus on e-commerce law and marketing law, we understand that pricing strategy plays an important role in the success of a business. At the same time, federal and state laws are forming to increasingly regulate online pricing, subscription billing, automatic renewals, and junk fees. There are also class actions and other private actions suing companies for alleged non-compliant subscriptions or other pricing non-compliance. There are also consumer advocacy organizations that “police” the space, such as Truth in Advertising (TINA), as can be illustrated by their complaint against HelloFresh.
Understanding Key Regulations
- Federal Trade Commission’s (FTC) Final Negative Option Rule: The FTC’s updated rule, effective October 16, 2024, expands its scope to cover all negative option marketing across various media. It requires clear disclosure of material terms, obtaining express informed consent, and providing simple cancellation mechanisms.
- California’s Automatic Renewal Law (ARL): California’s ARL mandates clear disclosure of automatic renewal terms, obtaining affirmative consent, and providing an easy-to-use cancellation process. It also requires renewal reminders for longer-term subscriptions.
- New York’s Subscription Laws: Similar to California, New York requires clear disclosure of subscription terms, explicit consumer consent, and clear cancellation instructions.
- Colorado’s Subscription Laws: Colorado’s auto-renewal law, which took effect on January 1, 2022, imposes unique requirements on subscription billing practices. The law mandates that businesses send renewal notices to Colorado customers 25-40 days before any renewal that extends a contract beyond a 12-month interval, even for monthly subscriptions. This applies to the 12th, 24th, and 36th-month renewals, and so on. Additionally, the law requires businesses to provide a “simple, cost-effective, timely, easy-to-use, and readily accessible” cancellation mechanism for Colorado customers. These provisions make Colorado’s law one of the strictest in the nation regarding subscription renewals and cancellations.
- The Restore Online Shoppers’ Confidence Act (ROSCA): ROSCA is a federal law designed to protect consumers from deceptive online billing practices, particularly those involving negative option marketing. Under ROSCA, businesses must clearly disclose all material terms of a transaction before obtaining billing information, secure express informed consent from consumers before charging them, and provide a straightforward mechanism for canceling recurring charges. This law is enforced by the FTC and aims to prevent unauthorized billing and ensure transparency in subscription-based services.
- Junk Fee Prevention Act: This federal bill aims to establish requirements for fees charged by covered businesses, including those providing short-term lodging, ticketing services, and telecommunications. It prohibits excessive or deceptive mandatory fees and requires upfront disclosure of total prices.
- FTC’s Rule on Unfair and Deceptive Fees: The FTC’s rule bans businesses from charging hidden and bogus fees in certain sectors, namely hotels and other lodging, as well as event tickets, ensuring consumers know the exact price they will pay. It requires including all mandatory fees in advertised prices and prohibits misrepresenting the nature of fees.
- California Senate Bill 478: Effective July 1, 2024, this law prohibits advertising or displaying prices that do not include all required fees or charges, with limited exceptions for taxes and shipping costs.
- Dark Patterns: The FTC and other regulators have intensified their enforcement against the use of dark patterns in subscription services, particularly focusing on practices that make it difficult for consumers to cancel subscriptions. The FTC’s “Click-to-Cancel” rule mandates that businesses must provide a cancellation process that is as straightforward and accessible as the sign-up process, addressing concerns over manipulative design practices that trap consumers in unwanted subscriptions and sued Amazon in this regard for their Amazon Prime subscription cancellation flow as well as an action against Adobe.
Our Online Pricing Compliance Services
- Regulatory Assessment: We review your current pricing models and fee structures to identify potential compliance gaps.
- Policy Development: We assist in drafting compliant terms of service, pricing policies, and consent forms.
- Training and Support: We provide training on compliance best practices and regulatory updates.
- Ongoing Monitoring: We ensure your business remains compliant with evolving legal standards.
- Proactive Approach: We help you stay ahead of regulatory changes to mitigate compliance risks.
Ensuring compliance with these critical regulations is crucial for maintaining consumer trust and avoiding legal pitfalls.
Learn how we can assist you in achieving full compliance with these complex and evolving pricing laws.
Online Pricing Legal News
- Federal Trade Commission Announces Bipartisan Rule Banning Junk Ticket and Hotel Fees
- FTC Issues Orders to Eight Companies Seeking Information on Surveillance Pricing
- Apply California’s click-to-cancel law nationally, GCs advised