BILL ANALYSIS Ó
AB 2867
Page 1
Date of Hearing: April 27, 2016
ASSEMBLY COMMITTEE ON UTILITIES AND COMMERCE
Mike Gatto, Chair
AB 2867
(Gatto) - As Amended March 28, 2016
SUBJECT: Cable and Internet service providers: contracts
SUMMARY: Requires a cable or Internet service provider, if it
enables an individual to subscribe to its services through an
Internet Web site, to also enable all of its customers to cancel
their subscriptions through the Internet Web site.
EXISTING LAW:
1)Provides, under the Unfair Competition Law, that unfair
competition includes any unlawful, unfair, or fraudulent
business act or practice, including any unfair, deceptive, or
untrue advertising, or any act prohibited by the False
Advertising Act. (Business and Professions Code Section 17200
et seq.)
2)Prohibits any person with the intent, directly or indirectly,
to sell any goods or service by making any statement, which is
untrue or misleading, and which is known, or which by the
exercise of reasonable care should be known, to be untrue or
misleading. Prohibits any person from making or disseminating
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any statement as part of a plan or scheme to sell any good or
service at a price other than the state or advertised price.
(Business and Professions Code Section 17500)
3)Specifies that it is unlawful for any business making an
automatic renewal or continuous service offer to a consumer to
do any of the following:
a) Fail to present the automatic renewal offer terms or
continuous service offer terms in a clear and conspicuous
manner before the subscription or purchasing agreement is
fulfilled and in visual proximity, or in the case of an
offer conveyed by voice, in temporal proximity, to the
request for consent to the offer.
b) Charge the consumer's credit or debit card or the
consumer's account with a third party for an automatic
renewal or continuous service without first obtaining the
consumer's affirmative consent to the agreement containing
the automatic renewal offer terms or continuous service
offer terms.
c) Fail to provide an acknowledgment that includes the
automatic renewal or continuous service offer terms,
cancellation policy, and information regarding how to
cancel in a manner that is capable of being retained by the
consumer. If the offer includes a free trial, the business
shall also disclose in the acknowledgment how to cancel and
allow the consumer to cancel before the consumer pays for
the goods or services. (Business and Professions Code
Section 17602)
FISCAL EFFECT: Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
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COMMENTS:
1)Author's Statement: "Cable and Internet providers in
particular continue to carry a reputation for poor customer
service and have been known to use aggressive sales tactics to
retain contracts, particularly when consumers request
cancellation. A SoundCloud clip recently went viral
highlighting these aggressive tactics. In this case, the
individual was transferred to a service representative trained
to talk people out of cancelling their contracts. The
recording reveals the service representative continually
asking for an explanation as to why this individual was
choosing to cancel service, even though the man repeatedly
declined to answer. This call was roughly 20 minutes long, at
which point many other consumers would have hung up the phone
before successfully canceling their service ? Consumers should
not have to endure aggressive sales tactics that border on
harassment in order to cancel a service contact. Therefore, AB
2867 will require a cable or Internet service provider who
allows consumers to subscribe to service online to also have
the option to cancel their service online."
2)Background: In 2010, Congress passed the Restore Online
Shoppers' Confidence Act (ROSCA) which grew out of consumer
complaints in which a consumer who completes an online
transaction with one merchant is presented with a free trial
promotional offer from another third party merchant. If a
customer accepts the promotional offer, the original merchant
transfers the consumers' data to the third party seller who
continues to charge the customer on a recurring basis after
the trail period, or until the customer cancels. This lead to
customer complaints that they were unaware that their payment
information would be transferred to a third party merchant
during the time of the promotion and that they would continue
to be charged after the free trial period. ROSCA prohibited
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an online merchant from sharing billing information with a
third party seller, unless it obtained the consumer's
expressed informed consent before charging their accounts. It
also required sellers to provide simple mechanisms for a
consumer to stop recurring charges from being placed on his or
her account.
In addition, in 2009, the Legislature passed SB 340 (Yee),
Chapter 350, Statutes of 2009, which requires any business
making an automatic renewal or continuous service to clearly
and conspicuously disclose terms of the offer and obtain the
consumer's affirmative consent to the offer. SB 340 was
prompted by an investigation by the Attorney General against
Time, Inc. in which subscribers to Time, Inc. magazines were
discovering that their subscriptions were automatically
renewed even though the consumer claimed they had never
knowingly consented to the renewal.
3)Comcast SoundCloud Cancellation Call: In 2014, an audio
recording between a Comcast customer and a customer retention
specialist was posted on the online audio Web site SoundCloud.
The call lasted approximately 20 minutes in which the
customer repeatedly attempted to cancel his service while the
customer retention specialist kept asking why he was doing so
over and over again. Comcast issued an apology and in a memo
to its employees said that it regretted that the incident had
occurred, and that it was painful to listen to, but the
customer retention specialist did a lot of what he was trained
to do. According to the author, canceling services has become
an ordeal that often involves consumer calling in and a
company retention specialist trying to change the consumer's
mind. Most customers would have hung up the phone before
successfully cancelling their service.
This bill requires a cable or Internet service provider that
allows an individual to subscribe to its services through an
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Internet Web site, to also allow all of its customers to
cancel their subscriptions through the Internet Web site.
The author may wish to consider an amendment to also include
satellite providers to the bill.
4)Arguments in Support: According to the California Association
of Competitive Telecommunications Companies (CALTEL),
"Although it's always beneficial for the provider to
understand, and attempt to address, the concerns that are
prompting a customer to cancel, CALTEL recognizes that this
practice has been prone to industry abuse and is not always
perceived favorably by consumers."
5)Arguments in Opposition: According to the California Chamber
of Commerce, the California Manufacturers and Technology
Association, the Direct Marketing Association, and CTIA - The
Wireless Association, "AB 2867 is duplicative of existing
federal law and the enactment of the measures would create
confusion for both consumer and companies ? AB 2867 adopts an
unrealistic view of the marketplace that fails to account for
the interests of customers, retailers and service providers in
attracting and pleasing consumer and the consumer benefits
that may be available. Indeed, by establishing rigid,
unbending rules, AB 2867 discourages consumers from resolving
problems in a way that is beneficial to them ? AB 2867 would
effectively create a significant hurdle to retention efforts
and likely result in increased contract terminations that
could have otherwise been avoided."
6)Suggested Amendment:
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1726. If a cable, satellite, or Internet service provider
enables an individual to subscribe to its services through an
Internet Web site, it shall also enable all of its customers
to cancel their subscriptions through the Internet Web site.
7)Prior Legislation:
SB 340 (Yee), Chapter 350, Statutes of 2009: Requires any
business making an "automatic renewal" or "continuous service"
to clearly and conspicuously disclose terms of the offer and
obtain the consumers' affirmative consent to the offer.
REGISTERED SUPPORT / OPPOSITION:
Support
California Association of Competitive Telecommunications
Companies
Opposition
California Cable & Telecommunications Association
California Chamber of Commerce
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California Manufacturers and Technology Association
CTIA - The Wireless Association
Direct Marketing Association
Analysis Prepared by:Edmond Cheung / U. & C. / (916) 319-2083