Subscription law complexity highlighted by New York Times lawsuit

The New York Times continues to face a 2022 lawsuit claiming it violated North Carolina’s Automatic Renewal Statute, highlighting the difficulties publishers face when attempting to navigate the growing patchwork of state laws regulating subscription businesses across the U.S.

U.S. states have stepped up their scrutiny of subscription practices in recent years, specifically around automatic renewal charges and the provision of free trials. As subscription models gain prevalence and the legal requirements for operating them become more complex, experts say they’ve seen a notable increase in litigation targeting violations. 

Some states’ auto-renewal laws offer particularly “easy targets” for plaintiff attorneys, experts say, because their disclosure and consent requirements are so specific.

Plaintiff Megan Perkins filed a class-action suit against the New York Times in a New York federal court in June 2022 alleging the publisher automatically renewed her subscription 23 times without her knowledge and consent. The Times attempted to get the suit thrown out, but – although the court dismissed part of the plaintiff’s claim – the suit is being allowed to proceed on the basis that the Times did not clearly disclose its cancellation methodology and that the terms of subscription price increases were not provided in the format required by North Carolina’s statute.

Specifically, NC’s automatic renewal statute states that if the terms of a contract – such as pricing – are changed at renewal, those terms must be displayed in a bolded, 12-point typeface. NYT “failed to identify subscription rate increases in a bolded typeface,” the court said.

Operating subscription products legally in the U.S. is becoming more challenging as states across the country pass new laws and amend existing ones to regulate subscription businesses more closely. At least 20 states now have laws in place regulating subscription models, but local legislatures continue to pass new laws and revise existing ones. 

“States are imposing more granular requirements around subscriptions and it’s likely we’re going to see more states with laws on the books,” said Julie O’Neill, a partner at law firm Morrison & Foerster, who specializes in consumer protection compliance. 

Specific legal requirements vary, but states such as California and New York impose particularly stringent rules designed to ensure companies communicate subscription terms to consumers prior to purchase, gain explicit consent to charge customers on an ongoing basis, and provide straightforward cancellation mechanisms and procedures.

Some publishers say they’re employing a “one size fits all” approach to compliance. This involves establishing a single checkout flow and notice system that satisfies most states’ automatic renewal laws and rolling it out to all customers across the U.S. If laws change at the state level, the broad approach can be updated to ensure general compliance is maintained for subscribers in different markets across the U.S.

This may result in instances where publishers are more transparent with subscribers than they’re legally required to be in some states, but publishers may feel more comfortable with being “over-compliant” than non-compliant.

According to law firm Gunderson Dettmer, to comply with most state requirements, companies must ensure they provide clear and conspicuous notice of offer terms, collect affirmative consent from subscribers, deliver a post-sale acknowledgment, provide consumer-friendly cancellation options, and notify subscribers of any upcoming payments prior to being charged. (Specific requirements are far more detailed, however.)

The exact approaches taken by different publishers will vary based on a variety of factors, including the nature of their companies and their products, the location of their audiences and subscribers, access to resources and their tolerance for risk.

O’Neill said tracking customer complaints closely could provide a strong signal if approaches and systems need revisiting and updating. “Companies should keep a close eye on complaints, and if they’re seeing an uptick in complaints it may be a good time to reevaluate,” she said.