The Legal Side: Is automatic renewal a deceptive business practice?


 

The list of states that are enacting laws affecting the automatic renewal in contracts is expanding and you need to be certain that your contracts and your business practices incorporate the latest requirements. Failing to comply can have severe consequences well beyond the single subscriber contract you are seeking to enforce. You can check your state law at a page I've put on my website focused on auto-renewal issues.

In 2006 Time Inc., publisher of Time magazine, was sued by the attorney general of Iowa for deceptive business practices involving automatic renewal of magazine subscriptions. Iowa had and has no law regarding automatic renewal. Yet the attorney general's office took the position that Time Inc. engaged in deceptive business practices, a law which is addressed in all states. Twenty-three additional states joined the Iowa action. If you have a moment, take time to read the press release from the Iowa AG's office regarding this issue.

The following states were part of the suit:

  • Alaska
  • California
  • Delaware
  • Florida
  • Hawaii
  • Illinois
  • Iowa
  • Maine
  • Maryland
  • Michigan
  • Missouri
  • Nevada
  • New Jersey
  • New Mexico
  • New York
  • Ohio
  • Oregon
  • Pennsylvania
  • Tennessee
  • Texas
  • Virginia
  • West Virginia
  • Wisconsin


It is significant to note that most of these states, including Iowa, do not have laws prohibiting or addressing automatic renewal clauses.

Time Inc had to pay $4.3 million to its customers and another $4.5 million to the states. Most of you don't have to worry about fines like that because you'll be long out of business, but those of you who would like to stay in business should pay heed.

Your contracts should not have automatic renewal beyond month-to-month unless your state's automatic renewal law specifically addresses the issue. Pennsylvania has just enacted legislation that addresses automatic renewal, so in the contracts I write, I do provide for a three-year renewal in Pennsylvania. However, in all other states my contracts provide for month-to-month renewal, which generally suffices in states with legislation and those states that have no legislation.

One of the ways we stay on top of new laws is through your participation in this discussion, so please let me know of developments that come to your attention; you can reach me through alarmcontracts.com.

About the author: Ken Kirschenbaum, Esq., is a New York-licensed lawyer practicing with Kirschenbaum & Kirschenbaum PC, a Long Island legal firm with a rich history of assisting clients in security and alarm related matters. Ken can be contacted via email at ken@kirschenbaumesq.com. His website, www.kirschenbaumesq.com, features a great supply of legal information and court rulings relevant to the security industry. You can also sign up for Ken's discussion list from his homepage.

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