Last week, California's legislature proposed amendments to its Automatic Renewal Law (ARL) to tighten the already-strict requirements for autorenewal, negative option, and continuous service offers. The law would impose new requirements for disclosures, consent, and cancellation.

First, the law would require companies to obtain the consumer's affirmative consent to the automatic renewal or continuous service "separately from any other portion of the contract." This mirrors many of the Federal Trade Commission's (FTC) proposed changes to its Negative Option Rule, which regulators have interpreted to require a separate checkbox or similar mechanism for a consumer to agree to the autorenewal terms.

Second, the updates would prohibit companies from including any information in the contract that interferes with, detracts from, contradicts, or otherwise undermines the ability of consumers to provide their affirmative consent to the automatic renewal or continuous service. Similarly, it would prohibit a company from misrepresenting, expressly or by implication, any material fact related to the transaction, including, but not limited to, the inclusion of an automatic renewal or continuous service, or any material fact related to the underlying good or service.

This would significantly broaden the potential violations and allow regulators and class action plaintiffs to target companies for any statement or misrepresentation of their policies—even if unrelated to the autorenewal program—such as their refund policy, guarantees, and any fees, including so-called junk fees. In fact, it might allow enforcers to file autorenewal lawsuits challenging claims about the underlying product, such as a company's failure to substantiate claims, failure to disclose material connections with endorsers and influencers, and even "greenwashing" by making allegedly misleading environmental claims.

Third, the bill would require companies to permit customers to cancel their subscriptions "in the same medium" that the consumer used to enter the autorenewal. This would codify the position taken by the FTC and the California Automatic Renewal Taskforce (CART) and indicates that email cancellation would not be sufficient for web- or app-based transactions.

If a customer enrolls by telephone, the company would need to permit the customer to call the same telephone number to cancel their autorenewal. The phone would need to be answered during "business hours," defined as no fewer than 12 hours between 6 a.m. and 10 p.m., inclusive, Pacific Standard Time or Pacific Daylight Saving Time, as applicable, of each day from Monday to Friday, inclusive, other than state holidays). The company also could not obstruct or delay the consumer's ability to cancel or require the consumer to engage in additional steps to immediately cancel.

Next, the bill would require additional notice if a company raises the price of an existing annual autorenewal offer.

Finally, the bill would require companies to send annual reminders with specific disclosures—even if the autorenewal term is not one year or longer. The reminder would need to disclose the automatically renewing product or service, the frequency and amount of autorenewal charges, and the cancel mechanism.

The proposed legislation looks very similar to the FTC's proposed updated Negative Option Rule, and if it takes effect in its current form, it could significantly change companies' compliance obligations.

The amendments will only apply to contracts "entered into, amended, or extended" on or after January 1, 2025. It is unclear whether that includes customers who enrolled before January 2025, though we expect the law will be interpreted broadly by state regulators and class action plaintiffs' attorneys.