Special Alert

California recently enacted a new law regarding the use of automatic renewal and continuous service offers, commonly referred to as negative option marketing. This law makes it unlawful to fail to present the offer terms in a clear and conspicuous manner, or to charge the consumer for an offer without first obtaining the consumer's affirmative consent. The law also requires that companies provide an acknowledgment to consumers that includes the terms of the offer, the cancellation policy, and information regarding how to cancel. If there is a material change in the terms of the offer, the law requires that companies provide consumers with a clear and conspicuous notice of the change and information regarding how to cancel. The law provides that if a company sends products to a consumer without first obtaining the consumer's affirmative consent, the products shall be deemed an unconditional gift to the consumer. This law is effective December 1, 2010.

TIP: Negative option automatic renewal and continuity programs are facing increasing scrutiny. If you use such tactics, you should ensure that you are in compliance with the requirements of this law, as well as FTC guidelines, although this law largely mirrors existing FTC guidelines and policies.