Here’s a summary of some of the key changes to the law:

• The new law explicitly applies to “free-to-pay conversions,” which are generally defined as agreements in which consumers will receive something for free for an initial trial period, but will later be charged unless they cancel before the end of the trial period.
• The law explicitly requires “express affirmative consent” to the automatic renewal terms beyond consent to an agreement containing the terms. And in a nod to the growing concern about “dark patterns,” the law prohibits companies from including information in a contract that undermines the ability of consumers to provide affirmative consent to the automatic renewal.
• The law will require companies to maintain “verification” records of a consumer’s affirmative consent for at least three years, or one year after the contract is terminated, whichever period is longer.
• As with the FTC’s proposed expansion of its Negative Option Rule, the law will make it unlawful for companies to misrepresent any material fact related to the transaction, including any material fact related to the underlying good or service.
• The law will generally require companies to allow consumers to cancel through the same method they used to sign up or interact with the business and will prohibit companies from obstructing or delaying a consumer’s attempt to cancel.
• The law will put tight parameters on what companies can do to “save” consumers who want to cancel by presenting other offers, both by phone and online. On the phone, companies must first tell consumers that they can stop listening to the offers by reiterating their desire to cancel. If companies present alternative offers online, they must simultaneously and prominently display a button that allows consumers to cancel without viewing those offers.
• The law will impose additional requirements for notices to consumers after they have agreed to the terms. For example, companies will have to provide notices of any fee changes and they will have to send annual reminder notices to consumers under an annual automatic renewal agreement. The law will require specific disclosures in these notices.

The law will apply to a contract entered into, amended, or extended on or after July 1, 2025. Although that leaves companies about nine months to prepare, we know that many companies engaged in a last-minute scramble to make the necessary changes after the law was last updated. It’s not too early to start thinking about what changes you’ll need to make to comply with this law and whether or not you want to make those changes for consumers outside of California, as well – especially since other states may be interpreting their laws to include similar requirements (even if they aren’t explicitly mentioned in the laws).

The FTC alleges that Adobe and two of its executives did resort to trickery to make their subscription plans look more attractive. Specifically, the FTC alleges that Adobe pushed consumers towards an “annual paid monthly” subscription without adequately disclosing that cancelling the plan in the first year could cost hundreds of dollars. Consumers would only learn about the early termination fee (or “ETF”) if they discovered it in the fine print or hovered over small icons to find the disclosures.

In addition to failing to clearly disclose the ETF in the sign-up flow, the complaint alleges that Adobe made it difficult for consumers to cancel their subscriptions. For example, consumers had to deal with dropped calls, multiple transfers, and resistance from customer service representatives. Some people who thought they had cancelled continued to see charges on their credit card statements. The FTC said that a large volume of consumer complaints should have led the company to know something was wrong.

The complaint alleges that the defendants failed to comply with the Restore Online Shoppers’ Confidence Act (or “ROSCA”) and the FTC Act by failing to clearly and conspicuously disclose material terms of the transaction – including details of the ETF – before getting a consumer’s billing information. The complaint also alleges that Adobe violated ROSCA and the FTC Act by failing to provide “simple mechanisms” for consumers to stop recurring charges.

It’s too early to predict how this case will turn out, but we can still learn some important lessons at this stage. Federal and state regulators continue to focus on subscription plans, so you should make sure that your sign-up flows clearly present all material terms and that your cancellation process works smoothly. You should also monitor consumer complaints so that you can identify and fix problems before regulators become aware of them.

We all have our blemishes, but if you try too hard to hide them, that could lead to unpleasant surprises for everyone when they are finally discovered.

From kids on social media to fake reviews and junk fees, state AGs are working across state (and partisan) lines on initiatives that promise to mold the consumer protection landscape for years to come. In this post, we reflect on our conversation with Todd Leatherman, who works at the forefront of these issues as Director of the National Association of Attorneys General (NAAG) Center for Consumer Protection.

Trend 1 – Protecting America’s Online Youth

For state enforcers, children are top-of-mind, especially when it comes to social media. A coalition of 33 state AGs filed a federal lawsuit in California alleging Meta violated state consumer protection laws and the Children's Online Privacy Protection Act. The AGs claim that Meta knowingly designed and deployed addictive and harmful features on its social media platforms, intentionally addicting children and teens and misleading the public about whether its services were safe for younger children. A number of other states have filed similar lawsuits in state courts including Nevada, which also targeted TikTok and Snap. These lawsuits are ongoing and will no doubt affect how social media platforms engage younger consumers.

This year, Oregon AG and NAAG President Ellen Rosenblum chose her Presidential Initiative as: “America’s Youth: AGs Looking Out for the Next Generation.” This initiative and corresponding NAAG Presidential Summit will include programming on technology, physical health, mental and behavioral health, and financial literacy.

On the legislative front, we have seen new laws aimed at protecting young people online. Florida recently passed a law banning social media accounts for minors under 14 and requiring parental consent for 14 and 15-year-olds. Georgia may soon also require minors under 16 obtain parental consent to create an account, following similar restrictions passed in Louisiana, Texas, Arkansas (currently enjoined pending litigation), and Utah. Generals Letitia James of New York and Rob Bonta of California have also advocated for state legislation targeting the addictive features of social media. Given the aforementioned, we expect AGs to tune into emerging issues affecting children for years to come.

Trend 2 – Big Tech’s Advertising Practices

For years, big tech has been a leading issue for bipartisan cooperation among state enforcers. Last year, we saw a $700 million settlement with Google and 53 state AGs over the Google Play Store. This led to significant reforms in Google’s practices, including how consumers access apps and how payments are processed. Currently, 38 state AGs and the Department of Justice have sued Google over alleged anti-trust violations, including monopolizing the search market. The cases were consolidated with closing arguments slated to begin May 1^st.

Since our conversation with Mr. Leatherman, DOJ and 16 other state attorneys general announced a landmark lawsuit against Apple alleging that it monopolized the smartphone market. This includes allegations that Apple intentionally makes it difficult for consumers to switch cellphones and undermines innovation, among other claims.

Trend 3 – Algorithms and AI

The promise and perils of AI have drawn major focus at AG offices across the nation and at NAAG, according to Leatherman. Last year, 54 AGs sent a letter to Congressional leaders encouraging them to study how AI may lead to child sexual abuse and exploitation online. Another collation of 26 AGs submitted a comment to the FCC on the use of AI in robocalls with the FCC later voting to ban robocalls using AI-generated voices. (Revisit our post on Washington’s new AI task force here.)

Now, we’re seeing AGs particularly concerned about racial and gender bias in AI programs used in employment, housing, and financial lending and services. Enforcers are also looking into the marketing of AI, including whether companies are overpromising on what the technology can actually provide. Given how quickly AI is advancing across sectors, we expect to see more scrutiny in the months ahead. And stay tuned for additional information on AGs and AI as our team will be reporting on the NAAG and AGA Southern Region Meeting on Artificial Intelligence and Preventing Child Exploitation occurring in April.

Trend 4 – Fake Reviews

Fake reviews, including misleading influencer content, have drawn AG attention. This year, 22 AGs submitted a letter to the FTC largely supporting a new rule that would govern and ban fake reviews. That rulemaking is ongoing.

States, including New York and Washington, have taken individual action against companies engaged in deceptive review practices. This includes instructing employees or associates to post positive reviews, threatening or intimidating consumers who post negative reviews, or requiring consumers to sign NDAs to receive services. Notably, states are able to enforce the Consumer Review Fairness Act, a federal law.

Trend 5 – Automatic Renewals

States continue to enforce their recently enacted automatic renewal statutes or provisions (for example, laws in California, New York, Washington D.C., and Virginia), which generally impose disclosure requirements, require that companies obtain affirmative consent from consumers, and mandate cancellation mechanisms. This includes requiring an online cancellation option when a consumer signs up for a service online. That said, states do not necessarily need a new law to target these practices as their general consumer protection laws likely apply. AGs may also enforce the federal Restore Online Shoppers' Confidence Act.

Trend 6 – Junk Fees

Companies that advertise one price and then tack on fees should beware. Enforcers are making so-called “junk” or hidden fees a priority. California has passed a new law governing fees and Massachusetts is in the process of instating new regulations governing them. Not to be outdone, the FTC has also proposed a rule on fees with a virtual hearing to take place in late April. (This aligns with the Biden administration’s whole-of-government approach to junk fees with other rulemaking and guidance out of the FCC, CFPB, HUD, and DOT).

That said, AGs take the position they do not necessarily need new legislation to target fees. Pennsylvania has led the way in asserting claims under state consumer protection laws and the Consumer Financial Protection Act against companies that impose fees. Similarly, Connecticut and the FTC have joined forces in litigation against a car dealer that allegedly deceived consumers about the nature of fees and add-ons. And Washington D.C. has warned restaurants that service charges could be unlawful if they are not disclosed before an order is placed.

Trend 7 – Privacy

States continue to pass and enact new privacy laws. Earlier this year, New Hampshire became the 15^th state to pass a comprehensive state privacy law and several other privacy bills are currently making their way through the legislative process. Many of the new laws will become effective this year through 2026, spurring enhanced AG interest in privacy matters.

In California, we saw the first investigative sweep in this arena with General Rob Bonta sending out letters to popular streaming apps and device companies alleging they failed to comply with California’s new privacy law. According to the office, the investigation will focus on opt-out requirements for business that sell or share consumer personal information.

Trend 8 – Veterans

While veterans have long been a priority for state AGs, the uptick in businesses offering to “counsel” or support veterans in applying for government benefits has sparked new AG activity in this space. Last year, a bipartisan group of 44 AGs sent a letter to Congress urging the body to pass legislation that further protects veterans in the application process and the Texas AG’s office sued a company that misled veterans about their ability to help obtain benefits and charged alleged excessive fees in the process.

Trend 9 – Health

In the health space, opioid marketing, vaping, and illegal cannabis products continue to take center stage. While the larger opioid cases have concluded, litigation is far from over. AGs have been leading the way in targeting manufacturers, distributers, and pharmacies that engaged in deceptive marketing tactics around opioids. We’ve also seen a focus on nicotine and cannabis products, particularly those that may appeal to children. A group of 33 AGs sent a letter to the FDA urging more stringent regulations on electronic nicotine delivery products, including on the marketing of e-cigarettes and the use of influencers to promote them. Connecticut and Nebraska have also cracked down on illegal marketing of cannabis products using their state consumer protection laws.

Trend 10 – Rapid Response

Many businesses fail to realize how substantial a role AGs play in emergencies and urgent consumer issues. They face public pressure to respond to events in real-time. For instance, the Taylor Swift concert ticket debacle led to more than 2,600 consumer complaints in Pennsylvania alone.

And, when it comes to a market disruption or natural disaster, some states have specific price gouging laws that provide state AGs enforcement authority. These laws vary by state and it can sometimes be difficult for companies to know when they are in place. We’ve seen a rise in AGs targeting companies following emergency situations for increasing prices on consumer staples and targeting charities that mislead consumers about donations in the time of crisis.

Kelley Drye’s state AG team will continue to monitor consumer protection trends in 2024. To view our full conversation with NAAG’s Todd Leatherman, click here. To stay up-to-date with our AdLaw Access blog, subscribe here.

In some cases, the alleged endurance contest required consumers to call or chat with sales agents who are trained to engage in a six-part script designed to convince customers not to cancel. Agents are instructed to “think of every ‘No’ simply as a request for more information,” to ask questions, and to pitch other offers. Many consumers complained that the cancellation process was time-consuming and frustrating.

The complaint alleges that Sirius violates New York’s automatic renewal law, which requires companies to implement a “cost-effective, timely, and easy-to-use mechanism for cancellation, ” the state’s general deceptive act and practices laws, and that a violation of the federal Restore Online Shoppers’ Confidence Act (or “ROSCA”) is a violation of their general statute. The AG seeks restitution and damages for aggrieved customers and disgorgement of all profits related to the alleged deceptive practices. It’s worth noting the NYAG obtained a $740,000 settlement including restitution stemming from a mental health provider Cerebral’s cancellation processes just a week after the Sirius suit.

As we’ve posted before (and highlighted in our year-end update), states are very focused on automatic renewals and cancellations, and dark patterns, so this lawsuit isn’t a surprise. Here are a few additional observations, though:

• The lawsuit was prompted, in part, by “voluminous affidavits and complaints submitted to the NYAG and other agencies.” Companies should pay attention to consumer complaints before regulators do.

• We’ve focused a lot on ensuring that public-facing materials comply with automatic renewal laws, but the AG’s review of training materials and scripts is a good reminder for companies to review those materials for red flags, and to promptly address if they discover issues of concern.

• The AG carefully scrutinized data on wait times on how long it took consumers to cancel. You should do the same. As more states require companies to implement easy cancellation processes, we expect that states will focus on how long it takes people to cancel.

If you haven’t examined your automatic renewal practices lately, you may want to consider making that one of your new year’s resolutions.

• Regulators’ Favorite Shade – Dark Patterns: Following the FTC’s 2022 Dark Patterns Report and high profile enforcement action against Epic Games, regulators including the FTC, CFPB, and state AGs continued to bring enforcement and provide guidance on perceived “dark patterns” – primarily related to automatic renewal and continuous service options, but also as to chat bots, disclosures, and marketing practices more broadly. In January, the CFPB released guidance focused on dark patterns in negative option marketing. In March, the NAD joined the discussion in a decision highlighting potential issues with Pier 1’s advertising of discounted pricing only available with a paid subscription and its use of a pre-checked box for enrollment with that same subscription. The FTC continued to lead the charge – with dark patterns allegations playing a key role in a number of enforcement actions, including against Publishers Clearing House, Amazon, and fintech provider Brigit.

• Beyoncé and Taylor Swift Concerts Lead to War on Junk Fees: Okay, the war against junk fees may have predated the fees associated with the pop stars’ mega tours, but it continued in earnest throughout the year. As with dark patterns, the FTC, CFPB and state AGs all took on junk fees at various times. Most notably, the FTC proposed a far-reaching rule that could fundamentally alter how prices and fees are disclosed in businesses across the country. The comment period was just extended until February 7, 2024 for the proposed rule. Not to be outdone, California passed new legislation banning hidden fees and the Massachusetts AG issued draft regulations that would prohibit hidden “junk fees,” enhance transparency in various transactions, and make it easy for consumers to cancel subscriptions.

• Endorsement Guides: In June, the FTC released its long-awaited update to the Endorsement Guides. We noted that the Guides include some significant changes, including new examples of what constitutes an “endorsement,” details about what constitutes a “clear and conspicuous” disclosure, and an increased focus on consumer ratings and reviews. We also examined how the revisions could affect influencer campaigns. In November, we reported that the FTC had sent warning letters to two trade associations and 12 influencers over their posts, giving us a glimpse of enforcement to come. Meanwhile, NAD has also been active in this space and even referred a case to FTC for enforcement. Expect this to be a priority for both FTC and NAD in 2024.

• Green Guides: The FTC’s Green Guides review progressed this year with an initial comment period closing in April, followed by an FTC workshop on “recyclable claims,” which we attended and highlighted here. With its history of hosting several workshops on hot green topics, we expect to hear of more workshops in the new year. California has been active as well with the governor signing a new law in October that aims to regulate carbon claims and make businesses more transparent about their carbon reduction efforts by requiring certain website disclosures (see our summary of the law here). The effective date is the first of the new year, but according to a recent letter from the bill’s sponsor, we expect that California will defer enforcement until January 1, 2025 to give companies time to comply (see here). With ESG efforts continuing to be front and center for most companies, consumers and regulators are holding companies accountable for those claims by questioning messaging about their efforts, aspirations for the future, and basis for the claims (see, for example, here, here, and here).

• State Privacy Laws: It’s getting increasingly hard to remember a time before state privacy laws regulated data sales, targeted advertising, sensitive data, and privacy disclosures. At the start of the year, five states had enacted privacy laws, and now there are 13 comprehensive consumer privacy laws (CA, CO, CT, DE, FL, IN, IA, MT, OR, TN, TX, UT & VA) and an additional two health-focused laws (WA, NV). What does this mean for advertisers? (1) Know who your vendors are and their data practices. (2) Obtain consent before building inferences based on sensitive data, like race/ethnicity, religion, or health. (3) Disclose up-front the collection, use, and disclosure of personal information. (4) Finally, recognize the limitations of third-party data as new regulations and laws take effect.

• Children’s Privacy: Congress, regulators, and advocates focused time and energy on children’s privacy issues in 2023. The House and Senate held hearings focused on children’s safety and privacy. Although the Senate Commerce Committee advanced the Kids Online Safety Act, it never received a floor vote; Senators Markey and Cassidy continued to advocate for approval of the Children and Teens’ Online Privacy Protection Act (COPPA 2.0). The FTC reached settlements with companies about practices it alleged violated the Children’s Online Privacy Protection Act (COPPA) on the Xbox and Alexa platforms and with edtech provider, Edmondo. In September, the FTC released a ​“Staff Perspective” on digital advertising to children, which included recommendations on how to protect kids from the harms of “stealth advertising.” Also in September, a federal court agreed with industry advocates that California’s Age Appropriate Design Act, which imposes a variety of obligations on businesses that provide online services “likely to be accessed by children,” violated the First Amendment. California is appealing the decision, and regulators, including a number of Attorneys General and FTC Commissioner Alvaro Bedoya, have joined the state as amici. One of the most anticipated developments occurred with just 11 days left in the year, when the FTC proposed revisions to the COPPA Rule—more than four years after initiating its review process. Among other things, the proposed Rule would require new, additional consents for third-party disclosures and could affect operators’ approach to “internal operations.” Online services with children’s audiences have lots to consider in 2024 and beyond. Stay tuned for further updates.

• State AG: State Attorneys General continued to make their presence felt in 2023. State AGs continued to go after companies for using fake reviews and false endorsements, enforced and proposed new price gouging rules, pursued telehealth companies for deceptive practices, supported the FTC’s Negative Option Rulemaking while bringing their own auto-renewal actions, continued to impose significant penalties against companies for data breaches, pursued companies for misleading consumer financial practices, and focused efforts on so-called “junk fees.” But two topics continue to be the highest priority of AGs – the impact of developments in AI (which we’ve written about here, here, and here – just to name a few) and protecting the most vulnerable consumers – especially our nation’s youth. The incoming president of the National Association of Attorneys General president, Oregon Attorney General Ellen Rosenblum, has already made protecting youth, especially teens, this year’s presidential initiative. Look for AGs to continue to this focus well into 2024.

• Automatic Renewal: While auto-renewal service sign-up flows remain important, this year, we have seen a transition to cancellation processes being the hottest topic as states enforce their specific requirements and the FTC has drawn attention to “click to cancel” through its proposed rule. But we shouldn’t forget all of the FTC’s other proposals under the negative option rule NPRM, including expanding the scope, requiring more specific disclosures, separate consent for negative option, consent for save offers, and expanded notice requirements. Regardless of whether a federal rule formally comes into play in 2024, as referenced above certainly states have agreed are on board with FTC’s proposals, and they also resolved a multistate investigation this year requiring checkbox consent, online cancellation, and limiting save attempts. And don’t forget Massachusetts is working on its own rulemaking involving online cancellation.

• NAD: This year, NAD issued number of decisions that caught our attention. For example, a decision in February narrows the scope of what claims may be considered puffery. NAD later elaborated on what it thinks advertisers must do in order to substantiate aspirational claims about future goals. NAD also issued a number of decisions involving endorsements – including employee endorsements and disclosure requirements – and even referred a case to FTC for enforcement. In August, NAD held that emojis could convey claims, though NARB later disagreed with how NAD had applied that principle. As always, NAD plays a big role in the advertising law landscape, so companies will want to continue to watch what NAD does in 2024.

• Same Product/Different Label Litigation: We chronicled a Connecticut district court’s denial of a motion to dismiss in a case in which the plaintiff alleged that Beiersdorf, maker of Coppertone sunscreens, engaged in false advertising by selling the same sunscreen formula in two different packages, one of which was labeled as “FACE” and sold in a smaller tube at twice the price of the regular Coppertone Sport Mineral sunscreen. That case is one to watch but it is not the only one of its kind. In fact, 2023 saw several similar cases involving allegedly the same formula marketed as different products with varying price points, such that the plaintiffs alleged that they were misled into purchasing the more expensive item because they believed it was uniquely suited to their needs when, in fact, it was the same as the lower-priced item. These cases involved a range of products, such as baby/adult lotions, infant/children’s acetaminophen, children’s/adult cold remedies, to name a few. So far, decisions are mixed, with some courts being more willing than others to find that the differing prices were justified. Marketers of food and personal care brands that merchandise the same formula in varying iterations will want to remain mindful of these cases as they update packaging and claims.

Keep following us in 2024, and we’ll keep you posted on how these trends develop. In the meantime, have a great holiday!

AG Campbell will be using the rule making power from the Massachusetts Consumer Protection Act, and the office will be taking public comments until December 20, 2023, holding a hearing and comment session on the same day.

Junk Fees

Some aspects of the junk fee proposed regulations mirror California’s junk fee statute and the FTC’s proposed junk fee rule:

• Requiring the total price to be disclosed when an offer is made; and
• Allowing required government fees to be excluded from the total price.

Others are closer to the FTC’s proposed rule:

• Requiring the total price be disclosed more prominently than any other price;

• Not excluding any particular industries or products; and

• Banning misrepresentations of fees.

Finally, still other portions differ from both:

• Requiring the disclosure of optional, refundable, or waivable fees at every offer point; and
• Requiring the disclosure of a total price each time it is presented, and before any personal information is collected (unless it is necessary to determine a legal sale or if the product is available in a geographic location).

These proposed requirements could have a huge impact on companies who had planned to deal with all-in pricing through providing optional fees or waiting to disclose the total price -- because the rule seems to require the disclosure of both the total price and any optional fees from the outset, and before any personal information (which isn’t defined) is collected.

Recurring Fees (Autorenewals) & Trial Offers

Some of the proposed MA regulations on autorenewals (940 C.M.R.38.05) do not tread new ground in comparison to some other states’ autorenewal statutes. For example, the proposal requires:

• businesses with online enrollment to provide online cancellation;
• disclosure of key terms of the trial offer prior to acceptance of the offer; and
• a reminder notice for trial offers exceeding 30 days that must disclose how the customer can cancel.

Where it seems to go further than other current state requirements is:

• Both the consent to the terms and any required reminder notice must include the calendar date the customer would incur the charge.
• The reminder notice “shall be provided in a manner substantially similar to that by which the consumer accepted the trial offer.”

This additional reminder notice and specific date requirement – particularly in the initial offer terms which are usually a static display – could pose technical challenges for companies. What will it mean to provide a notice in a similar manner to the acceptance if the customer accepted the offer on a website or app – would a push notification be required? A notification on the website?

Enforcement

The Massachusetts Consumer Act allows the AG to make rules, but it should be noted that “Such rules and regulations shall not be inconsistent with the rules, regulations and decisions of the Federal Trade Commission and the Federal Courts interpreting the provisions of 15 U.S.C. 45(a)(1) (The Federal Trade Commission Act), as from time to time amended.” This will make things interesting if the FTC continues to roll out its potentially inconsistent junk fee and negative option rules.

If the rule is finalized, the AG (and “any person”) has the same authority as it has under its Consumer Act to enforce and bring an action for damages, fees, and equitable relief. The AG may also seek penalties of up to $5,000 and restitution for certain violations.

Takeaways

The draft regulations include some confusing provisions and could have a significant impact on many companies. Companies who may be affected should consider submitting comments before the December 20 deadline. And expect more to come as other states continue to weigh in on “junk fees” and enforce their automatic renewal statutes.

A few months ago, NAD initiated an inquiry into an Instagram post sponsored by Blue Apron claiming that “Canceling meals is easy.” In reviewing whether Blue Apron offered consumers easy ways to cancel meals, NAD noted that the FTC’s recent report on “dark patterns” suggests that consumers should be able to cancel a subscription-based service through the same medium they used to sign up.

This month, NAD announced that it had initiated an inquiry into The Wall Street Journal’s express claim that subscribers could “cancel anytime.” Interestingly, NAD also read an implied claim into those two words:

NAD determined that a claim that consumers can “cancel anytime” reasonably conveyed the message that cancelling is easy. A consumer might reasonably expect that the ease of cancelling a subscription is similar to the ease of subscribing.

At the start of the inquiry, WSJ offered online cancellation to certain subscribers, but other subscribers had to call to cancel. During the proceeding, WSJ completed its planned expansion of its cancellation procedures to allow everyone to cancel online. Based on this change, NAD concluded that WSJ was able to substantiate the express and implied claims.

Notably, NAD doesn’t have authority to enforce automatic renewal laws or to require companies to establish specific cancellation procedures. Nevertheless, NAD pursued the same result by reading a specific procedure into WSJ’s statement that subscribers could “cancel anytime.”

Presumably, WSJ could have pushed back on NAD’s reading and refused to comply with its recommendations, but that would have likely triggered a referral to the FTC at a time the Commission is actively looking at these issues and seeking to impose penalties on companies that use “dark patterns” to make cancellation difficult.

If you want to keep track of updates in this area, subscribe to our blog. You can cancel anytime (with all that may imply).

The AGs note consumer experiences and harms after a group of AGs filed a comment to a 2019 ANPR. Examples include consumers accepting a gift but then being charged full price for the offer without knowledge; consumers having difficulty cancelling magazine subscriptions; and consumers attempting to cancel a subscription through chat features on a company website but being given roadblocks throughout the process.

The letter outlines the current enforcement landscape for different negative option marketing schemes including a partial list of resolved state settlements with companies.

Here are some highlights of the AG positions on the Rule:

• Autorenewal issues could signal potential deceptive representations about the underlying product or other parts of the transaction.
• AGs agree the rule should also require marketers to present material terms “clearly and conspicuously” and immediately adjacent to the consent. They propose amendments requiring the disclosure of “all material policies concerning cancellation” and “all the information necessary for the consumer to effectively cancel” citing concerns with cancellation issues with click to cancel features that lead to “confusing cancellation flows.” The AGs also suggest that material information should be capable of being retained by the consumer.
• AGs propose an additional consent before charging a customer after the completion of a free trial, suggesting it is not overly burdensome and would benefit consumers.
• AGs agree with the Rule’s proposal that a cancellation mechanism must be “at least as simple as” the method the consumer used to sign up for the negative option feature. For example, if the consumer signed up online, then the consumer should be able to cancel online. The AGs reference “voluminous complaints” about consumers unsuccessfully cancelling. They also propose adoption of a New York statute’s language that a simple cancellation mechanism must be “cost effective, timely, and easy to use,” discussing that being understaffed should not be an excuse for a lengthy cancellation. In addition, the AGs propose a new category of cancellation by chat or text message. Finally, they suggest an amendment that consumers should be able to cancel through any medium the seller uses, and not be limited to what they signed up with.
• These AGs agree that sellers should obtain affirmative consent prior to a “save” attempt with a consumer. (Note the AGs limited save attempts in resolving their recent Adore Me settlement.) The AGs also add that the Rule should clarify that save attempts for subscribers should not be presented in a manner that is more prominent than the option to decline, referring to that as a potential dark pattern.
• Consumers should receive reminders, “at least annually, identifying the product or service, the frequency and amount of charges, and the means to cancel.” Particularly if the seller provides non-physical products and services, the AGs strongly endorse the requirement for regular reminders for these subscriptions. The AGs further suggest the reminders should be provided not only through the same medium that the consumer used to consent, but also through any other medium used to communicate with the consumer and include all material information required in other portions of the Rule.
• The FTC’s proposed Rule should not infringe on state authority to regulate negative option marketing in their own jurisdictions.

It’s important to note that the AGs consider clear disclosures and simple cancellation mechanisms to be required under the current federal and state requirements, including state specific autorenewal laws and more general UDAP statutes. However, as these comments suggest, states’ interpretations of current requirements and proposals for new ones show they sometimes go beyond what the FTC has proposed. On the heels of the multistate Adore Me settlement and given continued state comments and interest on this topic, it is clear the states will continue to pursue auto renewal actions. We will continue monitoring updates to the Rule as well as the general autorenewal enforcement landscape.

Under Adore Me’s VIP program, a member would be charged $39.95 per month, unless the member either purchased apparel or pressed a “skip” button during the first five days of that month. According to the FTC, the company advertised: “If you do not make a purchase or skip the month by the 5th, you’ll be charged a $39.95 store credit that can be used anytime to buy anything on Adore Me.”

Like the FTC, the states generally alleged that Adore Me (a) failed to properly disclose the terms of its VIP program and the amount of the monthly charge, (b) failed to adequately obtain consent to the terms, (c) made it difficult for consumers to cancel their memberships, (d) improperly forfeited consumers’ VIP store credits upon cancellation, and (e) misrepresented that discounted prices are time limited.

The settlement requires Adore Me to do various things, including:

• Clearly and conspicuously disclose all fees, costs, and material terms related to the VIP program and the credits;
• Obtain express informed consent – such as through a checkbox – from consumers before enrollment;
• Provide a simple online mechanism for consumers to cancel their membership, and promptly honor those requests; and
• Limit its attempts to “save” consumers who want to cancel.

In addition, Adore Me is required to notify all consumers with active VIP Memberships that they have an option to obtain a refund of any unused store credits. The $2.35 million will be paid to the 32 states involved in this investigation and will be used to further other consumer protection investigations. (New York, which was not part of this settlement, announced a separate $125,000 settlement with the company in 2018, four months after the FTC settlement.)

These settlements show that federal and state regulators are looking closely at automatic renewal programs. (In fact, some are actively looking for enforcement opportunities.) And although the FTC and state AGs sometimes work together towards a common resolution, resolving a dispute with the FTC doesn’t necessarily mean that states will be satisfied with that resolution, which is why we sometimes see additional settlements, even years later.

HelloFresh advertised that consumers could “get 16 free meals with your purchase + free shipping.” A link invited consumers to “learn more.” If a consumer were to click on that link, she’d find a detailed disclosure explaining the material terms of the offer. That disclosure included a lot of information and ran for 194 words. That may be too long to include in some ads, so it raises the question of whether presenting it through a link is sufficient.

NAD started by looking at the FTC’s .com Disclosure guidelines. Among other things, those guidelines state that “disclosures that are an integral part of a claim or inseparable from it should not be communicated through a hyperlink.” However, the FTC also acknowledges that “hyperlinks can provide a useful means to access disclosures that are not integral to the triggering claim,” provided that the link is obvious, near the claim, and conveys the nature of the information on the landing page.

In the past, NAD has held that “hyperlinks may not adequately alert consumers to the nature of the material limitations associated with the continuity plan that are material to purchasing decisions.” In this case, NAD parsed through the 194-word disclosure and determined that some terms were so integral to the claim that they should “be clearly and conspicuously disclosed in close proximity to the free claims.” Other terms could be provided via a link.

Advertisers will have to go through an exercise of parsing through their own offer terms to divide those terms that are “an integral part of a claim or inseparable from it” from those that are “not integral to the triggering claim.” The former should generally be included near the claim, while the latter may be provided through a link. Unfortunately, there often isn’t a clear answer to this problem and companies will often have to make difficult decisions.

Last June, the FTC announced that it was looking for input on ways to modernize the .com Disclosure guidelines, including by providing new guidance on the use of hyperlinks. The updated guidance may provide some answers. However, based on the tone of the press release – which among other things, complains that some companies are “burying disclosures behind hyperlinks” – it’s likely that not everyone will like those answers.

In her dissent, Commissioner Wilson characterized the proposed rule as an “end-run around the Supreme Court’s decision in AMG” and detailed a host of substantive and procedural issues with the proposed rule.

Further analysis and our take below.

Current Negative Option Rule & Other Regulatory Requirements Related to Negative Option Marketing

The existing Negative Option Rule covers a narrow category of negative option marketing known as prenotification negative option plans. Under such plans, which have traditionally involved book-of-the-month clubs and the like, sellers send periodic notices offering goods to consumers and then send – and charge for – those goods only if the consumer takes no action to decline the offer. The current Rule enumerates seven material terms sellers must disclose and requires them to follow certain procedures. In 2019, the FTC published an Advanced Notice of Proposed Rulemaking (ANPR), seeking comment on the need to amend and expand the Rule to cover more prevalent practices involving negative option marketing.

In addition to the Negative Option Rule, several other federal statutes and regulations could address negative option practices, depending on the context:

• Section 5 of the FTC Act, which prohibits unfair or deceptive practices, has traditionally been used to address unlawful negative option practices. In 2021, the FTC issued an Enforcement Policy Statement Regarding Negative Option Marketing to provide additional guidance regarding the agency’s interpretation and enforcement related to negative option marketing.
• The Restore Online Shoppers’ Confidence Act (ROSCA) was passed primarily to address offers made by third party sellers during or immediately following a transaction with an initial merchant. It also contains general provisions related to disclosures, consent, and cancellation but is limited to the material terms of a transaction for goods and services sold on the internet with a negative option feature.
• The Telemarketing Sales Rule (TSR) prohibits deceptive acts or practices and requires certain disclosures for negative option offers, but only applies to such offers made over the telephone through “telemarketing” as defined under the TSR.
• The Electronic Fund Transfer Act (EFTA) prohibits sellers from imposing recurring charges on a consumer’s debit card or bank account without written authorization.
• The Postal Reorganization Act (i.e., Unordered Merchandise Statute) prohibits the mailing of or billing for unordered merchandise.

Companies also need to consider a patchwork of state laws addressing negative option and automatic renewal offers. These laws often require companies to disclose specific material terms, provide written acknowledgments after consumers sign up, send written reminders before a term renews, and establish easy cancellation mechanisms.

Proposed Changes to the Negative Option Rule

The proposed amendments would alter the current Rule in fundamental and far-reaching ways:

• Expanded Scope: The new Rule (retitled “Rule Concerning Recurring Subscriptions and Other Negative Option Plans”) would cover all forms of negative option marketing, whether effectuated over the internet, phone, through print materials, and in-person transactions. Any persons “selling, offering, promoting, charging for, or otherwise marketing a negative option feature” would be subject to the new Rule.
• Expanded Authority to Seek Redress and Civil Penalties for Misrepresentations: Perhaps the most controversial feature of the new Rule, as discussed in Commissioner Wilson’s dissent (summarized more fully below), is the application of the Rule to any misrepresentations regarding the underlying product or service, even if it is wholly unrelated to the negative option feature. Specifically, the proposed Rule prohibits negative option sellers from “misrepresenting, expressly or by implication, any material fact related to the transaction, such as the Negative Option Feature, or any material fact related to the underlying good or service” (emphasis added).
• Expanded Disclosure Requirements: The new Rule requires sellers to disclose “any material terms related to the underlying good or service that is necessary to prevent deception” regardless of whether it relates to the negative option feature, including (1) that consumers’ payment will be recurring, (2) the deadline by which consumers must act to stop charges, (3) the amount or range of costs they may incur, (4) the date the charge will be submitted for payment, and (5) information about cancellation mechanisms. The Rule imposes requirements related to where, when, and how to make these required disclosures.
• Expanded Consent Requirements: The new Rule would require sellers to obtain separate consent for the negative option feature, refrain from including any other information that would interfere with or detract from consumers’ ability to provide consent, obtain consent for the entire transaction, and maintain verification of consent for three years. The Rule also imposes requirements on how such consent can be obtained.
• Expanded Cancellation Requirements (“Click to Cancel”): The new Rule would require cancellation to be “at least as easy to use as the method the consumer used to initiate the Negative Option Feature.” While the Rule does not generally define what it means to be “at least as easy to use,” at minimum, such cancellation must be effectuated through the same medium (such as Internet, telephone, mail, or in-person) that the person used to sign up for the negative option.
• Obtaining Consent Before Trying to “Save” an Account: Sellers must obtain the consumer’s “unambiguously affirmative consent” before presenting any additional offers, modifications to the existing agreement, or other similar information to try to persuade a consumer not to cancel a negative option feature.
• Expanded Notification Requirements: Sellers that do not provide automatic delivery of physical goods must provide consumers with reminders, at least annually, identifying the product or service, the frequency and amount of charges, and the means to cancel.

Potential Issues for Comment & Commissioner Wilson’s Dissent

In what is likely one of her final opinions before she departs the Commission at the end of the month, Commissioner Wilson laid out a number of issues with the proposed rule in her dissent:

• Far-reaching nature – civil penalties for claims about underlying products and services. The Advance Notice of Proposed Rulemaking (ANPR) published in October 2019 sought comment on “ways to improve its existing regulations for negative option marketing, a common form of marketing where the absence of affirmative consumer action constitutes assent to be charged for goods or services.” The ANPR, however, did not specifically seek comment on whether a proposed rule should address general misrepresentations about a product or service offered under a negative option plan. The proposed rule as written authorizes civil penalties and redress for a host of misrepresentations unrelated to the negative option feature itself, such as the efficacy of a dietary supplement sold through a subscription plan or the features associated with a video streaming or software service.
• Meeting standard for “prevalence” required for Magnuson-Moss Rulemaking. As we have discussed at length in other posts, the FTC must meet a number of procedural and substantive requirements before promulgating a rule under its Magnuson-Moss authority, as proposed here. Importantly, to justify a proposed rule, the FTC must find that “it has reason to believe that the unfair or deceptive acts or practices which are the subject of the proposed rulemaking are prevalent.” While court decisions on the meaning of “prevalence” are limited, the FTC must show here that there are prevalent UDAP violations as to all conduct addressed (i.e., misrepresentations related to negative option plans and the underlying products and services offered under those plans).
• Congressional intent or a means to circumvent AMG? As noted above, the proposal attempts to consolidate existing FTC rules and guidance on automatic renewal and negative option plans into a single rule with one set of standards. Other grants of authority to obtain civil penalties and consumer redress related to such plans, however, have been narrower. For example, Congress passed ROSCA to address a specific type of deception that was common at the time where consumers were unknowingly passed off to third-parties after a valid transaction and sold different goods and services. While ROSCA also includes general requirements for negative option features, it only requires disclosure of “material terms of the transaction,” rather than the underlying goods and services. This was a central issue in the Commission’s MoviePass settlement – as we discussed here – with then-Commissioner Phillips dissenting on the grounds that the new interpretation would result in “sweeping liability” for claims that were not part of the “material terms of the transaction.” The FTC makes very clear here that the new rule would reach much farther.

If finalized, the revised and expanded Negative Option Rule would go a long ways to countering the effects of the AMG Capital decision holding that the FTC lacks authority to obtain consumer redress under Section 13(b) – and then some, by also opening up civil penalties for covered practices. Comments are due on the proposed rule within 60 days of publication in the Federal Register, which we expect in the coming weeks.

NAD discovered this as part of their routine monitoring – or routine shopping (it’s hard to tell) – and had two related concerns about what Pier 1 was doing. First, whether advertising a discounted price for a product is misleading if it reflects a discount that is only available with a subscription. And second, whether Pier 1 clearly and conspicuously disclosed the material terms of the subscription before a consumer made a purchase decision.

NAD determined that it could be misleading to advertise a discounted price if it reflects a discount that’s only available with a subscription, unless the terms of the subscription are clearly disclosed. In this case, NAD was concerned that the subscription was automatically added to a cart with a pre-checked box, but that consumers wouldn’t see the material terms – including that the subscription automatically renews – unless they clicked on a link to “Learn More.” (NAD also questioned whether a pre-checked box was sufficient to show acceptance, though it stopped short of saying it wasn’t.)

In its decision, NAD leaned on the FTC’s “Bringing Dark Patterns to Light” report and the agency’s .com Disclosure guidelines. To those who have been following the FTC and state AG enforcement on automatic-renewals, the decision shouldn’t come as a surprise. But it does serve as a good reminder of how important it is to clearly disclose subscription terms, especially as more companies begin to offer discounts that are contingent upon consumers signing up for other services.

Today, the CFPB put out guidance warning covered companies and service providers that “dark patterns” surrounding negative option marketing violate the Consumer Financial Protection Act’s prohibition on unfair, deceptive, or abusive acts or practices. As the circular makes clear, the CFPB has already brought enforcement actions alleging deceptive practices around negative options (see this case against a consumer reporting agency, and this case against a company that provided registration and payment services to organizers of events and races). The announcement also notes that the CFPB’s approach to negative option “dark patterns” is generally harmonized with that of the Federal Trade Commission (the FTC put out its own Enforcement Policy Statement Regarding Negative Option Marketing in October 2021). The guidance highlights the need for companies using negative option marketing to ensure that consumers: 1) understand the material terms of the negative option; 2) provide informed consent before being charged; and 3) are able to easily cancel recurring charges.

Negative option marketing encompasses a variety of products, such as automatic renewals, continuity plans, and free-to-pay conversions. Per the CFPB, it’s vital that consumers understand the material terms of these products before signing up. Material terms that must be disclosed include:

• The fact that a consumer is being enrolled in, and will be charged for, a product or service;
• The amount the consumer will be charged;
• The fact that the charge will be recurring, unless the consumer takes affirmative steps to cancel; and
• For free or reduced cost trial periods, that charges will start or increase at the end of the trial period, unless the consumer takes affirmative steps.

In addition to clearly disclosing material terms, companies must also obtain informed consent from consumers before they can be charged for the product and service. Companies will not be deemed to have obtained consent if they are found to have mischaracterized any feature of the negative option, or provided any contradictory or misleading information.

Finally, companies need to be sure that they do not misrepresent their cancelation policies, make it unreasonably difficult to cancel, or fail to honor cancelation requests made using the company’s stated procedures. The ease of cancelation has been a priority not just for federal regulators, but for the state AGs and self-regulatory bodies as well (see our coverage of the NAD’s Blue Apron decision here). Many of these cases have stressed that companies should ensure that the means of cancelation is as easy as the method to sign up for the negative option.

While the CFPB’s interest in this area isn’t new, today’s guidance serves as a reminder to companies to review their practices surrounding negative options, as they will continue to face heightened scrutiny from regulators.

The case marks two important firsts for advertisers offering products or services through automatic renewal terms and for companies making money-making claims or using endorsements and testimonials. Specifically, the action is the first time the FTC has obtained civil penalties under the Restore Online Shoppers’ Confidence Act (ROSCA). The FTC also made good on its promise to bring cases under its Penalty Offense Authority, marking the first time the FTC has obtained civil penalties from a recipient of its Penalty Offense Notice for Money-Making Claims.

Civil Penalties for Misrepresentations related to Automatic Renewal Terms under ROSCA

The FTC previously laid the groundwork for the ROSCA count against WealthPress in its 2021 action against MoviePass, which we discussed here. In that case, the FTC alleged that MoviePass violated ROSCA by deceptively advertising its passes as offering “one movie per day” and then preventing subscribers from using the service as advertised. While that settlement did not include civil penalties, then-Commissioner Phillips dissented on the grounds that ROSCA could not be fairly interpreted as addressing any claim about the characteristics of a product/service subject to an automatic renewal term. Instead, ROSCA authorizes civil penalties for failure to clearly and conspicuously disclose “all material terms of the transaction” before obtaining a consumer’s express informed consent to the negative option offer.

That tension is also present in the WealthPress case – with Commissioner Wilson issuing a concurring statement on the 4-0 vote (Commissioner Phillips’ former slot remains open) stating that she supports “the inclusion of a ROSCA count in this complaint under the highly specific circumstances presented here.” Commissioner Wilson goes on to explain that the defendant made the deceptive claims “part of the terms of sale” by including a disclosure about profitability in the Terms and Conditions that consumers consented to at purchase. She notes that “[i]nformation of this type that appears in another format, though, may more appropriately be viewed as a claim about the good or service and not a term of the transaction,” which would render it outside the scope of ROSCA.

Other Commissioners appear to be less cognizant of that distinction, such that any advertiser offering an automatic renewal feature could be on the hook for civil penalties for alleged misrepresentations if the FTC views the misrepresentation as part of the “material terms of the transaction.”

Civil Penalties under Penalty Offense Authority

While the FTC has brought many actions involving earnings and opportunity claims (including one in November that explicitly references the Penalty Offense Notices), the WealthPress case marks the first time that the FTC has obtained civil penalties against an advertiser following receipt of its Penalty Offense Notice for Money-Making Claims.

Many of the claims identified in the complaint are quintessential examples of aggressive claims likely to garner regulatory scrutiny, whereas others are more mundane, such as “we give you everything you need, and if you’re a beginner not a problem.” The FTC also notes that disclaimers in the Terms and Conditions (for example, “The past performance of any trading system or methodology is not necessarily indicative of future results”) were incapable of qualifying the aggressive earnings claims made elsewhere.

In addition to Penalty Offense Notices concerning Money-Making Claims, the FTC has issued notices concerning Endorsements and Testimonials and For-Profit Educational Institutions, which may be the next target for civil penalties under the Penalty Offense Authority.

• Dark Patterns: Any practices that could manipulate or mislead consumers into taking actions they wouldn’t otherwise take will continue to receive maximum scrutiny from the FTC and state AGs. Over the past year, we saw a new FTC staff report on “dark patterns,” as well as enforcement actions against Vonage and Fareportal. Private plaintiffs (see here and here) as well as consumer advocates are taking note. Companies should give serious consideration in their product interfaces, disclosure and notice design, purchase flows, cancellation methods, auto-renewals, and other consumer communications to any “nudge” activities that could be interpreted as problematic “dark patterns.”

• Individual Liability: The FTC isn’t backing down from its commitment to hold individuals liable in its cases, and did so in numerous matters in 2022 (Drizly, Passport Auto, Napleton, Electrowarmth, Roomster). At the same time, it’s worth noting the absence of individual liability in several recent high-profile cases (Twitter, Facebook, Google, Vonage), suggesting, perhaps, that the agency recognizes there are some challenges and trade-offs to inclusion in certain cases. In any case, given Chair Khan’s repeated remarks emphasizing the need for executive accountability (see here and here), we expect to see a continued effort to include individuals in FTC complaints and orders. This same theme has been echoed by the CFPB, with Director Chopra recently outlining his vision for increased individual accountability and encouraging State Attorneys General to take the same approach.

• Post-AMG Money Woes. The FTC continues to scramble for dollars post-AMG. Some creative initiatives include using its penalty offense authority to extract civil penalties for practices it claims are covered by prior administrative orders (Walmart, Kohl’s, DK Automation). The agency is also turning to Section 19 where possible and has initiated several new Mag-Moss rulemakings to codify certain unfair or deceptive practices (more on that in a separate bullet). In addition, the FTC is partnering with states to obtain monetary relief using state statutes (Google). We can expect to see more creative avenues for obtaining monetary penalties or relief in the new year.

• Green Claims: As more companies develop Environmental, Social, and Governance (“ESG”) goals and advertise their progress towards those goals, we’re starting to see more challenges to those ads. Although defendants have scored some notable victories this year (such as these), NAD often looks at green claims with a more critical eye. (Click here, for example.) We expect this trend to continue in 2023, though the biggest development may be the FTC’s long-awaited update to its Green Guides.

• Automatic Renewals: Programs that automatically renew have been under a lot of scrutiny. Much of the focus has been on the sign-up process and whether companies have used deception or “dark patterns” (see above) when enrolling consumers in recurring billing. Lately, regulators and plaintiffs’ attorneys have also been paying attention to how people cancel. (Click here, for example.) Some regulators have indicated this will be an enforcement priority next year. And big settlements in class actions suggest more of those will be on the way.

• Endorsements and Reviews: This year, the FTC announced its first case involving the failure to post negative reviews. Since then, they have announced proposed updates to the Endorsement Guides, a proposed rule to combat fake reviews, and teamed up with states to challenge misleading endorsements and reviews. (Click here, for example.) Meanwhile, NAD has also focused on how companies advertise reviews. (Click here, for example.) We expect these trends to continue in 2023.

• Mag-Moss Rulemakings: Undeterred by the cumbersome Mag-Moss process, the FTC announced several new ANPRs in 2022: commercial surveillance, earnings claims, reviews and endorsements, and junk fees. New rules may benefit industry by providing clarity and certainty, but they may also do more harm if they turn out to be very prescriptive or unclear (see, for example, our recent write-up regarding the pitfalls of the proposed impersonation scam rule). We’ll be watching to see how much progress the agency is able to make on this ambitious effort in 2023.

• State Attorneys General: While State AGs have always been a major player in advertising enforcement, they continue to gain attention and prominence as part of the post-AMG fallout as the primary regulator who can seek significant monetary remedies for violations of state unfair and deceptive trade practice laws. AGs have collaborated throughout 2022 in pursuing some of the priorities otherwise identified in this list, notably in settling with Google over allegations of dark patterns in its collection of geolocation information, and settlements with Google and iHeartMedia over the use of misleading endorsements for the Pixel mobile phone. But looming in the background is ongoing criticism, largely from Republican Attorneys General, about the National Association of Attorneys General and multistate enforcement generally, that may result in less coordinated multistate activity and more individual state action in 2023. That said, we still predict bipartisan efforts to dominate AG enforcement in particular with high profile consumer protection initiatives, but we will continue to monitor developments in and out of NAAG for any changes in trends.

• Right to Repair: The FTC is focused on ensuring that consumers have options when it comes to repairing products. In 2019, they held a workshop to discuss manufacturer restrictions on repair rights, including provisions that void a warranty if the consumer uses third-party parts or independent service centers. In a 2021 report, they concluded there was “scant evidence to support manufacturers’ justifications for repair restrictions.” After that, they issued a Policy Statement calling for more aggressive enforcement against manufacturers that impose these restrictions. Since then, they entered into three settlements over this issue. While the FTC took action under existing law, federal and state legislatures continue efforts to pass legislation specific to right to repair. Expect these efforts to continue in 2023.

• NAD Jurisdiction: Following a move from CARU, NAD announced that it would expand its jurisdiction to include “resolving complaints or questions concerning national advertising that is misleading or inaccurate due to its encouragement of harmful social stereotyping, prejudice, or discrimination.” So far, we haven’t seen any decisions involving this provision. It will be interesting to see what standards NAD applies and what will happen if advertisers decide not to comply with NAD’s recommendations.

Keep following us in 2023, and we’ll keep you posted on how these trends develop.

According to the complaint, the company advertised reduced prices for items without clearly disclosing that those prices were only available to consumers who subscribed to a VIP membership program. When consumers made purchases, the company would automatically add a VIP membership to their shopping bags without clearly disclosing the material terms of the program. Moreover, the DAs allege that the company didn’t clearly disclose the material terms of its store credits.

As part of the settlement, the company has agreed to make several changes to its automatic renewal practices. Among other things, the company is required to: (a) clearly disclose the terms of its VIP membership; (b) get express consent to the terms (such as through a check box); (c) send an acknowledgment after consent; (d) send reminder before renewal, if the initial term is a year or longer; and (e) establish an easy cancellation mechanism that can be used exclusively online.

In addition to these changes, Savage X Fenty agreed to pay $1 million in civil penalties, $50,000 in investigative costs, and $150,000 in restitution. (Coincidentally, this is not the first time a lingerie company has gotten in trouble over its subscriptions. In 2017, Adore Me agreed to pay $1.3 million to settle an FTC investigation over similar issues.) Regardless of what you sell, if you do it through a subscription, the settlement provides a good outline of what you need to consider.

NAD initiated an inquiry into Blue Apron’s sponsored Instagram post with a statement that “Canceling meals is easy.” In reviewing whether Blue Apron offers consumers easy ways to cancel meals, NAD noted that the FTC’s recent report on “dark patterns” suggests that consumers should be able to cancel a subscription-based service through the same medium they used to sign up.

During the course of the inquiry, Blue Apron discontinued the practice of requiring customers to send an email for instructions on how to cancel their subscription. Now, customers have multiple ways to cancel their account via the Blue Apron app and website without contacting the company. Because consumers can sign up and cancel online, NAD determined that Blue Apron could support the claim.

We didn’t get an invitation to dinner, so we don’t know whether NAD used a Blue Apron subscription to cook any meals before easily canceling those meals. But we do know that cancellation processes will continue to be on the menu for plaintiffs, regulators, and (now) self-regulatory bodies. Make sure yours is easy and intuitive.

The Washington AG’s office recently commissioned an online survey of 1,207 adult Washington consumers “to better understand if consumers have encountered certain advertising and sales practices related to recurring charges and hidden fees.” Although the survey covers more ground, a press release issued by the AG’s office focuses on findings related to subscription services. Here are some of the highlights from the survey:

• 59% of respondents claimed that in the last four years they unintentionally enrolled in a subscription plan that automatically billed them when they thought they were making a one-time purchase.
• Of those respondents, 51% cited a pre-checked box as the reason they unintentionally enrolled. (Not surprisingly, when asked, 70% of all respondents opined that pre-checked boxes should be prohibited.)
• Notably, only 2.75% of respondents reported that they did not cancel the subscription because it was “too difficult to cancel.” Although that’s a small percentage, the AG estimates that this means that approximately 100,000 Washingtonians could not cancel an unwanted subscription.

Companies should take a close look at their automatic renewal practices to ensure they clearly disclose the material terms and minimize the possibility that consumers will be surprised when they see multiple charges. Think carefully about using pre-checked boxes. Although they are arguably not prohibited by law, it’s clear that many regulators frown on them. In fact, some settlements in this area specifically ban companies from using them. Finally, be sure to monitor and address complaints before someone else does.

* * * *

The plaintiff alleges that when he learned that his Game Pass subscription was going to be converted to an NFL + subscription, he attempted to cancel. He found the cancellation instructions to be unclear and unintuitive, and he was charged a fee, even after he thought he had cancelled. His attempts to resolve the problem by talking to chatbots and live representatives were frustrating and didn’t help. The complaint then makes some interesting guesses about what happened behind the scenes.

The plaintiff alleges that the NFL has “a scientifically designed process” to reduce “churn,” and that the process has “been developed and tested by experts in behavioral science and psychology and include interrelated manipulative design tactics referred to as ‘dark patterns.’” As a result, he alleged that the NFL “can scientifically ensure that no more than a fixed percentage of users will successfully navigate the gauntlet of obstacles laid down in front of them if they decide to cancel.”

The plaintiff’s attorney added a little more color to his theories when he told Law360 that the NFL had a practice of “trapping [consumers] in a Rube Goldberg machine combining elements of whack-a-mole and one of those mazes with the mirrors where you can’t get out.” (If any of our readers would like to share their ideas of what such a machine would look like, please send us your sketches, and we’ll add the winning designs to this post.)

It’s too early to predict how this case will turn out, whether consumers will escape the maze-like machine, or whether any moles will get whacked. But it is easy to predict that these types of cases will continue. If you offer automatically renewing subscriptions, you should obviously make sure you comply with relevant laws. Beyond technical compliance, though, you should take a look at your user interface to make sure it’s intuitive for consumers. And you should monitor complaints, which could provide hints of problems.