Last May, a class action lawsuit was filed in California alleging that Synapse Group, Inc., a magazine subscription agent, violated California law for failure to adequately disclose that magazine subscriptions they sold automatically renewed. The exhibit attached to the complaint reveals the following:

1. The solicitation was an offer for a choice of 5 complimentary subscriptions provided as a “reward” for completing a survey. Arguably, the context of the offer could be potentially misleading since a consumer might reasonably think a complimentary subscription would not have any strings attached nor cost the consumer $2 a subscription.

2. Before the consumer selected their magazines there was a reference disclosing that after the first complimentary year the subscriptions automatically renewed but the disclosure shown in the exhibit to the complaint was in a paragraph with no header to indicate its importance.  The disclosure was contained in the second to last sentence of the paragraph above the “continue” button and read:  “All selections come with automatic renewal features. Click continue for full details.”  The details were avoidable as a hyperlink.  The complaint alleges this was not an effective clear and conspicuous disclosure.

3. After clicking “continue” the consumer went to “Step 2” to input delivery information.

4. The full unavoidable disclosure that the magazine subscriptions will automatically renew and that the consumer will be charged occurred on a page marked “Step 3″ after the consumer had to click “continue” twice (e.g., “Step 1” and “Step 2”). This full disclosure appeared on the page where the consumer inputs billing information.

5. The disclosure that the consumer would be charged $2 per subscription was disclosed in a ruled box in the middle of the page on “Step 3” as follows: “Just $2 is required to cover your rate or processing for the entire year.” This ruled box was placed above where the consumer input billing information. However, the fact that the $2 charge was for each subscription was arguably not sufficiently clear until the full disclosures were provided above the “complete” button. That copy was contained in a paragraph with the header “Important Reward Details.”

6. Full details about how automatic renewal worked was also contained in the same paragraph under the header “Important Reward Details.”  The facts that the subscriptions would be automatically renewed and that the credit card provided for the $2 fee per magazine would also be charged for the renewal price of the magazines was disclosed midway in the 8 line paragraph.

7. Plaintiffs allege that the renewal prices charged to the two class action plaintiffs were 1,700% and 2,375% higher respectively than the $2 paid for the first year of each subscription. The terms of the offer, albeit in small type, did say that the consumer would receive an email before renewal with the price for each subscription for the next term. Whether the plaintiffs received a confirmation email (required by some laws) or a renewal email was not mentioned in the complaint.

Context counts so the fact that an offer is provided as a reward might indeed exacerbate the consumer communication but the disclosure that subscriptions or memberships automatically renew needs to be clear and conspicuous and also in compliance with state and federal law (including FTC  guidelines) or you risk enforcement action from regulators and/or litigation filed by class action attorneys.

I will keep you apprised of the outcome of this case. In the meantime, if you have any questions or want to review your own offers do not hesitate to call me.