New California Law Aimed at Deceptive Ad Claims Regarding Digital Products

December 24, 2024/Richard Newman
On January 1, 2025, an amendment to California’s existing false advertising law will become effective.  The amended legislation takes aim at deceptive digital ad representations that lead consumers to believe that they are purchsing owership rights in a product when, in fact, only a revocable license is being conveyed.
With limited exception., AB 2426 prohbitis sellers of digital goods from using terms such as “buy,” “purchase” or similar terms when the net impression thereof objectively leads a reasonable person to believe that they are purchasing an unrestrictice ownership interest.  The exception to the foregoing restriction is when a seller of digital products obtains affirmative acknowledgement from the buyer of a complete list of restrictions and conditions of the license, and that access to the digital product may be unilaterally revoked by the seller (e.g., if the seller no longer has the right to license).  Additionally, prior to completing the sale, the seller must provide the buyer with a hyperlink, QR code or other means of accessing the license terms and conditions, a a clear and conspicuous disclosure that purchase of the digital product merely constitutes a license.
The new legistlation defines “digital goods” broadly.  The law also sets forth exclusions, such as any distribution of television, video or radio service.  The new law also does not apply to specifically enumerated subscription-based services and digital goods such as those advertised for no monetary consideration.

Violation of the amended statute can result in civil penalties of up to $2,500 per violation.  It couls also potentially exposure a violator to class action litigation pursuant to California’s UCL law.

Takeaway:  Sellers of digital goods should consult with a seasoned ecommerce lawyer to assess current advertising and business activities and make modifications, as necessary and appropriate.

Richard B. Newman is an FTC compliance attorney at Hinch Newman LLP.  Follow FTC defense lawyer on National Law Review.

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

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Richard Newman

Richard B. Newman is a nationally recognized FTC advertising compliance, CID investigation and regulatory enforcemetn attorney. He regularly provides advertising counsel and represents clients in high-profile investigations and enforcement proceedings initiated by the Federal Trade Commission, state attorneys general, departments of consumer affairs, and other federal and state agencies with jurisdiction over advertising and marketing practices. Richard is also an ecommerce lawyer and spam defense attorney. His practice additionally focuses upon false advertising defense, data privacy, cybersquatting, intellectual property law and transactional matters relating to the dissemination of national advertising campaigns, including the gamut of affiliate marketing, telemarketing, lead generation, list management and licensing agreements. Richard advises clients on how to minimize the legal risks associated with digital marketing, email marketing, telemarketing, social media influencer campaigns, endorsements and testimonials, negative option marketing models, native advertising, online promotions and comparative advertising,
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About This Blog and Hinch Newman’s Advertising + Marketing Practice

Hinch Newman LLP’s advertising and marketing practice includes successfully resolving some of the highest-profile Federal Trade Commission (FTC) and state attorneys general digital advertising and telemarketing investigations and enforcement actions. The firm possesses superior knowledge and deep legal experience in the areas of advertising, marketing, lead generation, promotions, e-commerce, privacy and intellectual property law. Through these advertising and marketing law updates, Hinch Newman provides commentary, news and analysis on issues and trends concerning developments of interest to digital marketers, including FTC and state attorneys general advertising compliance, civil investigative demands (CIDs), and administrative/judicial process. This blog is sponsored by Hinch Newman LLP.

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