How to Comply With State and Federal Automatic Renewal Laws

The use of subscriptions models in the digital advertising marketplace has become ubiquitous.  So have legal regulatory investigation and enforcement of such ecommerce practices.

It is paramount for those that utilize such models consult with an eCommerce attorney to be informed of the legal implications of subscription-based services, including automatic renewals, trial offers and continuity plans.

Federal ARL Legal Regulations

At the federal level, the Federal Trade Commission enforces, without limitation, the Restore Online Shoppers’ Confidence Act (“ROSCA”).  ROSCA compliance is an FTC investigation and enforcement priority.  To date, the FTC has initiated approximately 50 ROSCA actions.  The largest ROSCA settlement to date is $2.5 billion.

ROSCA prohibits any post-transaction third party seller (a seller who markets goods or services online through an initial merchant after a consumer has initiated a transaction with that merchant) from charging any financial account in an Internet transaction unless it has disclosed clearly all material terms of the transaction and obtained the consumer’s express informed consent to the charge.

“Clear and conspicuous” disclosures are the centerpiece of ROSCA.  “All material terms” must be adequately disclosed prior to obtaining the consumer’s billing information.  Additionally, a consumer’s expressed informed consent my be obtained prior to charging the consumer’s credit card, debit card, bank account or other financial account for products or services through such transaction.  And, a “simple mechanism” for a consumer to stop recurring charges must be provided.

ROSCA violations are aggressively enforced by the FTC or state attorneys general as unfair and deceptive acts and practices.  Importantly, the FTC is entitled to seek, amongst other remedies, monetary civil penalties, consumer redress and damages.  There is no private right of action for a direct ROSCA violation.

The FTC’s Negative Option Rule covers pre-notification negative option programs.  Despite the Commission’s recent attempts to expand the coverage thereof beyond merely having to provide notice to consumers prior to the shipment thereof and charges therefor (“Click to Cancel Rule”), in July 2025 a U.S. Court of Appeals vacated the proposed amendments.  Since then, the FTC received petitions from the Consumer Federation of America and the American Economic Liberties Project requesting that rulemaking on the “Click to Cancel Rule” be reopened.  The FTC has since published the petition to reopen that rulemaking in the Federal Register.

The FTC also enforces the Telemarketing Sales Rule (“TSR”).  In part, the TSR obligates telemarketers to make enumerated disclosures and provides instruction on how and when such disclosures should be made, prohibits misrepresentations and deception, provides for calling curfews, precludes calls to consumers that have requested that they not be contacted, provides for various upselling restrictions, and provides for various payment-related restrictions.  The TSR covers, in pertinent part, negative option plans such as auto renewals offered via telemarketing.  With limited exemptions, the TSR also applies to business-to-business contracts.

TSR violations are also aggressively enforced by the FTC.  State attorneys general also frequently pursue do-not-call request violations.  Similar to ROSCA, the FTC is entitled to seek, amongst other remedies, monetary civil penalties.  The TSR provides for a private right of action in the event that a plaintiff’s damages total at least $50,000.

State ARL Legal Regulations

As referenced above, ARL violations are not only enforced by the FTC, state attorneys general can enforce such activity under state unfair and deceptive acts and practices consumer protection laws.  State ARL legislation often imposes requirements that exceed federal standards

A majority of states are either bolstering or passing new ARL legislation and the requirements can vary significantly amongst and between states.  For example, a handful of states have regulations specifically concerning free gifts or trials, as well as business-to-business related provisions.

An experienced FTC compliance lawyer can assist marketers using negative option features to comply with the patchwork of applicable federal and state ARL requirements.  State ARLs typically share numerous core components, including, without limitation, the implementation of adequate disclosures, obtaining express affirmative consent, obtaining post-purchase acknowledgements, provisions pertaining to attempts to save or dissuade consumers from cancelling, notice of the dissemination of renewal reminder notices, notice of material changes, and the implementation of simple cancellation mechanisms.

States such as, without limitation, Arkansas, California, Colorado, Connecticut, Maine, Maryland, Massachusetts, Minnesota, New York, Utah and Vermont have ARL legislation.  Perhaps the most thorough and aggressive state ARL legal regulations are found in Massachusetts and California.

California recently amended its existing ARL to impose new obligations on businesses offering subscription-based services to California consumers.  The amendments become effective on July 1, 2025.  The amendments track the recently vacated Federal Trade Commission amendments to the Negative Option Rule and include, without limitation, stronger disclosure and consent requirements, recordkeeping requirements, simplified cancellation requirements, prohibition on transaction related misrepresentations and omissions, and other notice requirements.  As the effective date approaches, businesses offering subscription-based services to California consumers should evaluate their confer with an eCommerce lawyer.

Takeaway:  The utilization of ARLs are a high risk advertising proposition.  Compliance with federal and state ARLs are critical in order to avoid costly investigations, lawsuits, injunctive relief, damages, monetary civil penalties. And reputation harm.  Consult an FTC compliance attorney if you are interested in the design and implementation of liability limiting ARL-related compliance strategies and staying up to date with applicable enforcement activity.

Richard B. Newman is a leading FTC lawyer at Hinch Newman LLP.  Follow FTC defense lawyer on National Law Review.

Informational purposes only. Not legal advice. This article is not intended and should not be construed as legal advice. May be considered attorney advertising.