BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 340|
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THIRD READING
Bill No: SB 340
Author: Yee (D), et al
Amended: 4/21/09
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 4/14/09
AYES: Corbett, Harman, Florez, Leno, Walters
SUBJECT : Advertising: automatic renewal purchases
SOURCE : Author
DIGEST : This bill requires, in any automatic renewal
offer, a business to clearly and conspicuously state the
automatic renewal offer terms and obtain the customer's
affirmative consent to those terms before fulfilling any
subscription or purchasing agreement on an automatic
renewal basis. This bill also requires all marketing
materials to clearly and conspicuously display a toll-free
telephone number, if available, telephone number, postal
address, or electronic mechanism the customer could use for
cancellation. This bill requires the order form to clearly
and conspicuously disclose that the customer is agreeing to
an automatic renewal subscription or purchasing agreement.
This bill imposes similar requirements for any automatic
renewal offer made over the telephone or on an Internet Web
page.
ANALYSIS : Existing law, the Unfair Competition Law
(UCL), provides that unfair competition means and includes
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any unlawful, unfair, or fraudulent business act or
practice and unfair, deceptive, untrue or misleading
advertising, and any act prohibited by the False
Advertising Act (FAA).
Existing law, the FAA, includes the following:
1.Prohibits any person with the intent, directly or
indirectly, to dispose of real or personal property, to
perform services, or to make or disseminate or cause to
be made or disseminated to the public any statement
concerning that real or personal property that is untrue
or misleading and known or should be known to be untrue
or misleading; and
2.Prohibits any person from making or disseminating any
untrue or misleading statement as part of a plan or
scheme with the intent not to sell that personal property
or those services at the stated or advertised price.
Existing law provides that any violation of the FAA is a
misdemeanor punishable by imprisonment in the county jail
not exceeding six months, or by a fine of $2,500, or by
both.
Existing law provides that any person who violates any
provision of the FAA is liable for a civil penalty not to
exceed $2,500 for each violation that must be assessed and
recovered in a civil action by the Attorney General or by
any district attorney, county counsel, or city attorney.
Existing law provides that a person who has suffered injury
in fact and has lost money or property as a result of
unfair competition may bring a civil action for relief.
Existing law provides for injunctive relief, restitution,
disgorgement, and civil penalties.
This bill requires all printed marketing materials
containing an offer with an automatic renewal term to
comply with the following: the customer's agreement to the
automatic renewal offer must be obtained in accordance with
either (1) or (2) below so that the customer is given the
opportunity to expressly consent to the offer:
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1. All automatic renewal offer terms must appear on the
order form in immediate proximity to the area on the
form where the customer selects the subscription or
purchasing agreement billing terms or where the
subscription or purchasing agreement billing terms are
described; the order form must clearly and conspicuously
disclose that the customer is agreeing to an automatic
renewal subscription or purchasing agreement; and the
automatic renewal offer terms must appear on materials
that can be retained by the customer.
2. Both of the following:
A. On the front of the order form, the marketing
materials must (i) refer to the subscription or
purchasing agreement using the term "automatic
renewal" or "continuous renewal," (ii) clearly and
conspicuously state that the customer is agreeing to
the automatic renewal, and (iii) specify where the
full terms of the automatic renewal offer may be
found; and
B. The marketing materials must clearly and
conspicuously state the automatic renewal offer terms
presented together preceded by a title identifying
them specifically as the "Automatic Renewal Terms,"
"Automatic Renewal Conditions," "Automatic Renewal
Obligations," or "Continuous Renewal Service Terms,"
or other similar description.
This bill requires all marketing materials that offer an
automatic renewal, when viewed as a whole, to clearly and
conspicuously disclose the material terms of the automatic
renewal offer and must not misrepresent the material terms
of the offer.
This bill requires an automatic renewal to clearly and
conspicuously describe the cancellation policy and how to
cancel, including, but not limited to, a toll-free
telephone number, if available, telephone number, postal
address, or electronic mechanism on the Internet Web page
or on the publication page of the printed materials.
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This bill requires, in any automatic renewal offer made
over the telephone, a business to clearly and conspicuously
state the automatic renewal terms prior to obtaining a
customer's consent and payment information. The business
must obtain a clear affirmative statement from the customer
agreeing to the automatic renewal offer terms and must send
a written acknowledgement that contains the toll-free
number, if available, telephone number, postal address, or
electronic mechanism for cancellation.
This bill requires, in any automatic renewal offer made on
an Internet Web page, the business to clearly and
conspicuously disclose the automatic renewal offer terms
prior to the button or icon on which the customer must
click to submit the order. In any automatic renewal offer
made on an Internet Web page where the automatic renewal
terms do not appear immediately above the submit button,
the customer must be required to affirmatively consent to
the automatic renewal offer terms. The automatic renewal
terms must be preceded by a title identifying them as the
"Automatic Renewal Terms," "Automatic Renewal Conditions,"
"Automatic Renewal Obligations," "Continuous Renewal
Service Terms," or other similar description.
This bill requires, in any automatic renewal offer, a
business to clearly and conspicuously state the automatic
renewal offer terms and obtain the customer's affirmative
consent to those terms before fulfilling any subscription
or purchasing agreement on an automatic renewal basis and
all marketing materials that offer an automatic renewal
subscription or purchasing agreement must clearly and
conspicuously display the cancellation policy and how to
cancel.
This bill provides that no business may represent that a
product is "free" if the cost of the product is
incorporated in the price of the accompanying item
purchased under automatic renewal conditions.
This bill provides that a violation of the bill's
provisions would not be a crime, but all applicable civil
remedies would be available.
This bill defines the following key terms:
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1. "Automatic renewal" would mean a plan or agreement in
which a subscription or purchasing agreement is
automatically renewed at the end of a definite term for
a subsequent term.
2. "Automatic renewal offer terms" would mean the following
clear and conspicuous disclosure:
A. That the subscription or purchasing agreement
will continue unless the customer notifies the
business to stop;
B. That the customer has the right to cancel;
C. That the customer will be billed, credit card
charged, or other appropriate description of the
payment method depending on the method described to
the customer, or chosen by the customer on the
front of the order form, and That the bill, charge,
or other payment method will take place before the
start of each new automatic renewal term;
D. The length of the automatic renewal term or
that the renewal is continuous, unless the length
of the term is chosen by the customer;
E. That the price paid by the customer for
future automatic renewal terms may change; and
F. The minimum purchase obligation, if any.
3. "Clear and conspicuous" or "clearly and conspicuously"
would mean, with respect to a written statement or
communication presented in a font, size color, location,
and contrast against the background in which it appears,
compared to the other matter which is presented, so that
it is readily understandable, noticeable, and readable.
4. "Marketing materials" would include any offer,
solicitation, script, product description, publication,
or other promotional materials, renewal notice, purchase
order device, fulfillment material, or any agreement for
the sale or trial viewing of products that are delivered
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by mail, in person, television or radio broadcast,
e-mail, Internet, Internet Web page, or telephone
device, or appearing in any newspaper or magazine or on
any insert thereto, or Internet link or pop-up window.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/21/09)
California Public Interest Research Group
Consumer Federation of California
American Federation of State, County and Municipal
Employees
California Alliance for Consumer Protection
ARGUMENTS IN SUPPORT : According to the author's office:
The author writes:
It has become increasingly common for consumers to
complain about unwanted charges on their credit cards
for products or services that the consumer did not
explicitly request or know they were agreeing to.
Consumers report they believed they were making a
one-time purchase of a product, only to receive
continued shipments of the product and charges on
their credit card. These unforeseen charges are often
the result of agreements enumerated in the "fine
print" on an order or advertisement that the consumer
responded to. The onus falls on the consumer to end
these product shipments and stop the unwanted charges
to their credit card.
A widespread instance of these violations resulted in
the 2006 Time, Inc. case, in which Time settled a
multi-state investigation into its automatic renewal
offers and solicitations. The states launched their
probe after receiving complaints from consumers that
Time was billing them or charging their credit cards
for unwanted magazine subscriptions. The states'
investigation found that these mail solicitations
misled some consumers into paying for unwanted or
unordered subscriptions.
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RJG:nl 4/21/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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