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Peter Roskam Comments on Possible Reconciliation Bill in Tax Notes Article

In Case of First Impression, Looking to AKS Precedent, Ninth Circuit Affirms EKRA Conviction for Improper Payments to Marketers

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Companies selling subscriptions have been busy navigating compliance with the Federal Trade Commission’s Negative Option Rule, which is <a href="https://www.adventures-in-law.com/blogs/ftc-delays-enforcement-of-negative-option-rule-until-july-14/" target="_blank" rel="noreferrer noopener">scheduled to go into effect July 14</a>. But when it rains, it pours. Despite the broad nature of the Negative Option Rule, it does not preempt state laws, and many jurisdictions have unique requirements that go beyond what’s in the Negative Option Rule. Massachusetts, New York and Connecticut are the latest to introduce new laws that add to the patchwork requirements faced by sellers in this space.

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The same Massachusetts regulation <a href="https://www.adventures-in-law.com/blogs/massachusetts-finalizes-junk-fee-regulation/" target="_blank" rel="noreferrer noopener">that introduced junk fee requirements</a> in the state also includes new requirements for recurring charges. The regulation’s requirements go into effect September 2. Like other laws in this space, Massachusetts requires certain disclosures prior to when a customer completes a transaction, including the recurring charges, whether they will increase and how to cancel. Cancellation must be available in the same medium the consumer uses to enroll. If enrollment is online, cancellation must be available through “the same website or web-based application” as enrollment.

As promised, however, there are some more unusual provisions. The regulation requires reminder notifications for all subscriptions with renewal periods greater than one month. Most states that require reminder notifications only require them for longer subscription terms. The notification must be sent five to 30 days prior to the cancellation date and include that the customer will be charged, how much they will be charged, how to cancel and the calendar dates by which the consumer must cancel and on which they will be charged. The medium by which this notification is sent must be substantially similar to the one used to purchase the subscription or be another commonly used medium that is affirmatively chosen by the subscriber.

Potentially the most significant provision is for subscriptions with renewal periods of one month or less. Companies must send these subscribers the same reminder notification or, alternatively, send a receipt after every renewal, though the regulation refers more generically to a notice disclosing “the amount the consumer has been charged” rather than a “receipt” directly. Like the reminder notification, the receipt must include how to cancel. This is a highly unusual requirement in comparison to the Negative Option Rule and other state laws.

There are also specific requirements around trial offers. Trial offers are not limited to free trials, like many state laws, and instead include any offer to use the product or service at a reduced charge, for a rebate or for incidental costs such as shipping. Trial offers have added disclosure requirements, including that at enrollment, the calendar dates by which the consumer must cancel and on which they will be charged must be disclosed. This level of specificity is again highly unusual in comparison with other laws.

New York’s budget bill passed in May included several changes to its automatic renewal requirements that will go into effect November 5.

Like Massachusetts’ law, this statute includes some new requirements for trial offers, which are expressly defined to include more than free trials. Any offer for which the price is “temporary” must disclose clearly and conspicuously “how and when the price will change and the price or prices that will subsequently be charged to the consumer.”

For price increases that happen in the normal course of business – in other words, the customer did not consent to the increase as part of a temporary trial at checkout – the seller must provide notice five to 30 days prior to the change going into effect and allow the customer to cancel for up to 14 days after the charge and receive a pro rata refund. This is another first-of-its-kind law in the U.S. for automatic renewals.

The other new requirements in New York are more similar to what is in the Negative Option Rule and other state laws. There must be a simple cancellation method that is at least as easy to use and in the same medium as how the customer provided consent. Presentation of discount offers and other information at cancellation is permitted so long as it doesn’t “unreasonably delay” cancellation. As in several other states, the seller must send a reminder notification 15-45 days before renewal if the initial term was one year or longer and the renewal is for at least six months. And the seller must send a similar notification three to 21 days prior to the cancellation deadline for a free trial of more than one month. All notifications sent under the New York law must be in the “manner selected by the consumer, including text, email, app notification or any other notification channel offered by the business.” It’s unclear whether this creates an affirmative requirement to permit customers to choose how they receive the notification or only establishes that if a customer has selected a preference then it must be followed.

Connecticut passed a bill amending its automatic renewal law June 10 that goes into effect July 1, 2026. Its provisions are limited to a reminder notification for annual renewals and additional requirements for cancellation when this is offered via telephone. Most notably here, the annual reminder must be sent in the same manner in which the service was activated or the manner in which the customer is accustomed to interacting with the business, whether by email, mail or telephone. If the service was activated via an in-person transactions, the notice must also be sent by email, mail or telephone. Presumably for online activation, this is interpreted to mean email reminders.

Each of these states and many others have comprehensive automatic renewal laws, similar to the Negative Option Rule. This most recent batch of laws is notable, however, for including several new requirements. Specifically:

Reminder Notifications<ul><li>Massachusetts requires reminder notifications for all subscriptions with terms greater than one month and reminder notifications or receipts for subscriptions of one month or less.</li></ul>
<ul><li>New York requires that the notification be sent in the manner selected by the consumer. It’s unclear whether this requires offering an affirmative choice.</li></ul>

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Promotional Trials<ul><li>Massachusetts imposes additional restrictions on promotional trials, including disclosure at enrollment of the calendar date on which the customer must cancel to avoid being charged.</li></ul>

Automatic Renewal Law Updates – Massachusetts, New York and Connecticut

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