FTC Announces $10 Million Settlement Over Automatic Renewals

We’ve written about automatic renewals before, but the $10 million price tag in the FTC’s settlement with the operators of ABCmouse should grab your attention.

The FTC alleged that over a three-year period, the company advertised membership programs without clearly disclosing Renewal Buttonthat the programs would automatically renew at the end of the term. The automatic renewal was not disclosed during the checkout flow. Instead, it was “buried” in small print amidst other dense text that consumers would only see if they clicked on a link to read Terms & Conditions.

Even though ABCmouse prominently advertised “Easy Cancellation,” the FTC alleged that cancellation was very difficult. Consumers who tried to cancel were required to navigate a lengthy and confusing process that often prevented many of them from completing their cancellations. In fact, evidence suggests that hundreds of thousands of consumers started the cancellation process, but remained enrolled.

Among other things, the proposed settlement order generally requires ABCmouse to:

  • Clearly disclose certain information about the offer up-front, such that consumers will see it without having to click to read separate terms;
  • Obtain express informed consent before enrolling consumers in any automatic billing programs;
  • Send a confirmation message that includes key program terms; and
  • Provide a simple mechanism for consumers to cancel.
If you offer services that automatically renew, you should look at the details of the settlement to see what the FTC expects. Even if you don’t, it’s worth noting that the company had received tens of thousands of complaints about its auto-renewal and cancellation policies. If you’re not paying close attention to consumers complaints, you should start doing so. That can help you detect patterns and address problems before a regulator forces you to do so, and with a much lower price tag.