Regularly Review and Update your Terms of Use and Privacy Policies

Regular review and revisions are key to keeping a company’s terms of use and privacy policy accurate and consistent with the company’s business practices.  For example, if your business offers subscriptions, automatic recurring orders or any other purchasing agreement that automatically renews, California law requires clear and conspicuous disclosures regarding the terms of the automatic renewal, and often beyond a company’s privacy policy or terms of use.

If the company fails to comply and doesn’t get explicit affirmative consent from each consumer to be charged for automatic renewals, the penalty is a full refund to the consumer of all payments made to the business, or an “unconditional gift” to the consumer.

The company may also face civil remedies for failure to comply with this law. Such failure to comply can cause a subscription-based company to risk losing substantial amounts of revenue.

The key requirements of California’s automatic renewal law include clear and conspicuous disclosures:

  • That the subscription or purchasing agreement will continue until the customer cancels
  • The description of the cancellation policy that applies to the offer
  • Recurring charges that will be charged to the customer’s credit or debit card and the amount of the charge, and the amount the charge will change, if known
  • The length of the automatic renewal term, unless the customer selects the length of the term
  • Minimum purchase obligation, if any; and
  • Notice of a material change in the terms of the automatic renewal or continuous service offer that has been accepted by the customer in California and information on how to cancel in a manner that is capable of being retained by the consumer.

California has one of the more rigorous automatic renewal statutes, given the penalty of a full refund to the consumer. However, Oregon has passed similar statutes, and other states, including Connecticut, Colorado, Illinois, Georgia, Florida, Hawaii, North Carolina and Louisiana, have passed variations of automatic renewal requirements.

Several other states have enacted automatic renewal requirements in specific circumstances (e.g., New York and Rhode Island).

Additionally, for companies considering a sale of their subscription-based business in the future, it is not too early to include a provision in their privacy policy that permits assignment or transfer of the company’s rights to its customers’ data.

The acquiring company may want such provision at the time of the company’s sale or sale of its subscription services, and this enables the company to anticipate the acquirer’s requirements and be better prepared for the transaction.

Dorothy Vinsky is Senior Counsel at Michelman & Robinson.

Partner Content

Hincapie Sportswear Finds Omnichannel Success in the Cloud - Netsuite
For more and more companies, a cloud-based unified data solution is the way to make this happen. Custom cycling apparel maker Hincapie Sportswear has leveraged this capability to gain greater visibility into revenue streams, turning opportunities into sales more quickly while gaining overall operating efficiency. Download this ecommerce special report from Multichannel Merchant to more.
The Gift of Wow: Preparing your store for the holiday season - Netsuite
Being prepared for the holiday rush used to mean stocking shelves and making sure your associates were ready for the long hours. But the digital revolution has changed everything, most importantly, customer expectations. Retailers with a physical store presence should be asking themselves—what am I doing to wow the customer?
3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.