Automatic Renewal and the Risk of Class Action Litigation

Consumer demand for convenience has touched almost every facet of Internet commerce. Every day across the country, consumers have ingredients and recipes for meals delivered to their doorsteps, wardrobes curated from afar shipped to their closets, and all manner of apps and other online services from gaming to dating downloaded to their computers and smartphones. In many instances, these offerings are provided on an automatically renewing basis, giving consumers easy ways to access and pay for goods and services and giving companies predictable revenue sources. Companies that provide such automatically renewing offerings, however, may be facing an increased risk of class action litigation.

To date, at least 22 states have enacted statutes that purport to prevent consumers from unknowingly agreeing to automatic renewals by regulating how and when automatic renewal offers can be made. Because they include the potential for wide-ranging damages, these statutes have attracted the interest of plaintiff’s lawyers looking for avenues for future class action litigation. For example, California, which has enacted a particularly stringent automatic renewal statute, saw a wave of class actions in 2013 involving popular music and video streaming companies. Most of those early cases resulted in quick and confidential settlements. The temporary respite in class actions based on these statutes, however, appears to be over.