As we welcome 2025—a year brimming with opportunities and challenges—it is clear that the trend of heightened requirements to protect purchasers from deceptive auto-renewing subscriptions remains front and center based on the changes seen during 2024. As we previously reported, the Federal Trade Commission (“FTC”) finally released the highly anticipated final rule related to negative options, which broadly expands compliance requirements to the business-to-business (“B2B”) context. Moreover, changes in California, South Carolina, Tennessee, and Utah have all established heightened requirements for these types of subscription programs—adding to the patchwork of applicable laws that must be considered. And while there has been pushback to the expansiveness of the FTC’s negative option rule (“NOR”), these state laws and basic requirements outlined by the FTC make clear that compliance cannot be a secondary thought because regulators are actively focusing enforcement efforts to curb related practices that do not provide consumers material disclosures and easy cancellation options.

Below is a summary of key legal changes seen in 2024, and what companies should prioritize as they evaluate and fine-tune their compliance programs in 2025. 

The FTC’S NOR

The FTC’s rules serve only as a federal baseline. Following the FTC’s release of the updated NOR, we are seeing anticipated pushback, in particular with respect to its application towards B2B transactions. This requirement goes beyond all state laws, which are typically limited to the consumer context, and challenges assert that it goes beyond the enforcement authority of the FTC. In particular, several challenges to the law were initiated by industry and trade groups in the last few months:

• The Electronic Security Association, the Interactive Advertising Bureau, and the NCTA – The Internet & Television Association filed a Petition for Review in the Fifth Circuit on October 22, 2024.
• The Michigan Press Association and the National Federation of Independent Businesses filed a Petition for Review in the Sixth Circuit on October 22, 2024.
• The U.S. Chamber of Commerce and the Georgia Chamber of Commerce filed a Petition for Review in the Eleventh Circuit on October 22, 2024.

Each of these challenges have been transferred to the Eighth Circuit and we anticipate courts will opine on applicability in the B2B context over the coming year.

2024 ARL Updates for California

Almost fifteen years after its enactment, and three years from its latest amendment to its automatic renewal law, California has again amended the law to include a number of heightened requirements. While California was already leading U.S. States in its prescriptive requirements, this latest amendment further heightens requirements that until now have only been included in a select few states’ laws. Companies have a leeway period and must ensure compliance for any contracts “entered into, amended, or extended” on or after July 1, 2025.

The details of significant changes are fleshed out below.

• Free-to-pay conversions—Now, California’s ARL covers free trial offers that automatically convert to paid subscriptions after an initial period (§ 17601(a)(1)). Practically, this means that businesses must receive consent to the paid subscription terms when offering a free trial with free-to-pay conversion.
• Express Affirmative Consent & Consent Record Retention—Businesses must now receive customers’ “express affirmative consent to the automatic renewal or continuous service offer terms” (§ 17602(a)(4)), although the amendments do not differentiate this consent from the existing requirement for “affirmative consent to the agreement,” if there is a difference at all. Businesses must also avoid misrepresenting “material facts” related to the transaction, including subscription terms, (§ 17602(a)(7)) and sharing contradictory or confusing information that nullifies this consent (§ 17602(a)(5)). Further, businesses must retain verification of this consent for at least 3 years or 1 year after the contract ends, whichever is longer (§ 17602(a)(6)).
• New cancellation provisions—The amended ARL allows businesses to present a “discounted offer, retention benefit, or information regarding the effects of cancellation,” in addition to exit surveys for feedback, as long as they also “prominently,” “continuously,” and “proximately” display a cancellation method online or inform the customer over the phone that they may complete cancellation as soon as they state their intent to cancel (§ 17602(e)(1)-(2)). Customers must be able to cancel in the “same medium” used to sign up for the subscription or by a method that they are accustomed to using when dealing with the business (§ 17602(f)). For phone calls to request cancellations, representatives must “promptly” answer during normal business hours and return voicemails or process these requests within 1 business day (§ 17602(c)(2)(A)-(B)). If a customer enrolls online and uses any direct cancellation link or button, the business must promptly process the cancellation without any delay (§ 17602(e)(2)).
• Expansion of the clear and conspicuous disclosures requirement— While there has always been a requirement to provide clear and conspicuous disclosures, the amendment now requires that such disclosure must be given prior to confirming the customer’s billing information as opposed to before the subscription or purchasing agreement is fulfilled. The clear and conspicuous disclosure must include (1) that the subscription will not end unless the customer cancels it; (2) the additional terms and length of the renewal period; (3) the frequency and amount of charges; and (4) method(s) of cancellation (for example, a link or other “reasonably accessible” electronic method, in addition to the contact information for the business) (§ 17602(a)(8)(A)-(F)). Without clarifying what “confirming billing information” exactly means, the law also states that businesses may notify “after completion of the initial order” (§ 17602(i)(1)). Moreover, where there is a free gift, trial, or promotional discounts or prices, such facts and changes to frequency in charges must also be disclosed prior to confirming the customer’s billing information.
• Annual Automatic renewal notices— While there has always been a time-based notice requirement under the law when enumerated subscription term length thresholds are triggered, the new amendment adds an annual renewal reminder notice requirement, regardless of the length of each subscription term—meaning month-to-month subscriptions that extend past a year will trigger this notice requirement. This reminder must be provided in the same medium that resulted in the activation of the automatic renewal or that the customer is accustomed to interacting with the business using and must include (1) the product or service to which the automatic renewal applies, (3) the frequency and amount of charges associated with the automatic renewal (3) and the means to cancel (§ 17602(h)(1)-(2)).
• Subscription fee-change notices—Businesses must further “clearly and conspicuously” notify customers of any subscription fee changes 7-30 days before the changes take effect, in addition to disclosing method(s) of cancellation (§ 17602(g)(2)(A)-(B)). This communication must be in a form that can be retained by the customer (§ 17602(g)(2)(B)).

2024 ARL Updates for Other States

While California is generally considered to set the ceiling for ARLs in the country, many other states have followed suit and established similar laws of their own. In 2024 the following states added material requirements in connection with auto-renewals:

• South Carolina—Starting May 20, 2024, businesses must notify customers subject to an automatically renewing service contract that renews for a period longer than a month and continues for more than six months. These notifications, like in California, must inform the customer of the renewal, the amount that will be charged without cancellation, and cancellation by a toll-free telephone number, e-mail address, postal address (if the seller directly bills the customer), or other cost-effective, timely, and easy-to-use method.
• Tennessee—Starting July 1, 2024, for automatic renewals that will occur more than 60 days after initial enrollment, businesses must notify these customers of upcoming renewals or charges. Moreover, the new bill defined “affirmative consent” as “a clear, affirmative act signifying a consumer’s freely given, specific, informed, and unambiguous agreement to the automatic renewal offer terms or continuous service terms; and [i]ncludes a written statement, including a statement written by electronic means, or an unambiguous affirmative action.” If there was no affirmative consent, the seller must refund the charge to the customer only if a request was made within 7 days of the charge.
• Virginia—Starting July 1, 2024, “automatic renewal,” unlike in California, requires a paid term of more than 1 month. Uniquely, Virginia law treats small businesses as consumers, in contrast with California and other states that do not address B2B contexts. Before completing the initial order that would charge the customer, businesses must receive affirmative consent to the automatic renewal agreement. If the offer will automatically renew after a period of more than 30 days, and it is extended for a period of more than 12 months, the business must send a notice to the customer regarding the option to cancel no less than 30 days and no more than 60 days before the cancellation deadline or end of the current contract term. The notice must conspicuously disclose (1) the automatic renewal if there is no cancellation, (2) the date that the customer must cancel by, (3) method(s) of cancellation, and (4) a copy of the automatic renewal or continuous service offer provisions.
• Utah—Starting January 1, 2025, an “automatic renewal provision,” unlike in California, requires a paid term that is longer than 45 days. Notice must be given at least 30 but no more than 60 days prior to the date customers must cancel by in order to avoid renewal, and it must include the renewal date, total renewal cost, and cancellation options for the contract. Like California, “clear and conspicuous” disclosure of the automatic renewal terms is required. Further, if there is a “trial period offer” (that is, “an offer to provide a period of time to sample or use a product or service without payment”), customers must receive a notice no less than 3 days before the end of the trial that informs them of the cancellation method(s) and the date they must cancel by in order to avoid the charge.

Next Steps

With the constantly evolving legal landscape related to ARLs, it is important for companies to be vigilant and address material requirements under these laws when implementing auto-renewal programs. Here are some basic guide posts to consider when evaluating the risk profile of a particular program and requirements for compliance:

• Disclosures at the final check-out process are not enough. Ensuring clear, conspicuous disclosures during the collection of billing information and at final checkout is necessary.
• Consent mechanisms need to support individualized acceptance of the renewal program itself. While we do not yet have clarity as to what will distinguish “affirmative consent” from “affirmative express consent,” other laws utilizing such phrasing focus on affirmative actions (like the use of an unchecked checkbox) individualized for the specific auto-renewal commitment.
• There must be clear language on how a purchaser can cancel, with a simple mechanism (including a simple cancellation link) provided.
• Notices and when they trigger are getting more and more complex. Companies would benefit from implementing an audit system for existing customer communications and reminder notices to ensure notices are timely received in accordance with applicable laws.
• Updating record-keeping practices related to consent as well as a customer’s use of the service/product or other benefits a customer took advantage of in connection with the accepted auto-renewal program.

Regulators are becoming more scrupulous of automatic renewal practices, and the more layers throughout the relationship of clear disclosures, along with a simple means to cancel, the better shielded a company will be from liability for non-compliance.

If you are actively assessing or reassessing your compliance program or are dealing with claims related to violations under any of these laws, the attorneys at Dentons can help navigate these nuanced issues to not only defend your business against the claims, but also to assist with the development of a tailored framework to expeditiously streamline operations for enhanced compliance and continuously feed ARL updates as they occur, to mitigate future claims. Our team has extensive experience dealing with these complex issues and helping our clients of all sizes and industries effectively alleviate these risks and minimize their exposure. If you have any questions, please do not hesitate to contact us.