Apparently, breaking up is hard to do, or at least expensive to do. eHarmony has been ordered to pay more than $2 million to settle a consumer protection lawsuit filed in California by four separate counties and the city of Santa Monica. According to Crowell & Moring’s Retail & Consumer Products Law Observer, eHarmony will pay up to $1 million to consumers who were enrolled in the company’s automatic subscription program between March 10, 2012 and December 13, 2016. eHarmony will pay an additional $1.28 million in civil penalties to the municipalities who sued eHarmony.
The settlement order filed in California Superior Court on January 8 shows that eHarmony has reached a settlement agreement with the city of Santa Monica, where the company is headquartered, Santa Cruz County, Santa Clara County, Napa County and Shasta County. As part of the settlement, eHarmony did not admit any wrongdoing. The court has required that eHarmony change its business practices, specifically regarding its automatic renewal and cancellation processes for subscriptions.
Upcoming September Webinar Line-Up
Don't miss our exciting line up covering revenue growth through data,
The court outlined those requirements which include:
- eHarmony must obtain the consumer’s affirmative consent prior to entering into a subscription agreement and charging their credit or debit card. Affirmative consent can be obtained through a check-box, signature or substantially similar mechanism.
- The automatic renewal or continuous service offer must be clear and concise and located in close visual proximity to the affirmative consent mechanism.
- Immediately following the completion of a contract, the company will email confirmation to the subscriber. The subject line must clearly identify that it is a confirmation of the transaction and it must clearly and conspicuously disclose the terms of the automatic renewal offer.
- The company must provide a toll-free number, email address or postal address or another ‘cost-effective, timely, and easy-to-use mechanism’ for cancellation.
- All cancellations must be effective within one business day of the company’s receipt of the cancellation request, and the subscriber will not be charged any additional fees unless obligated by contract to do so.
In response to the Crowell & Moring, Ronald N. Sarian, vice president and general counsel for eHarmony, issued a brief statement. Here is an excerpt.
‘Without any admission, we have cooperated with the government, which has previously launched similar investigations against a long list of eCommerce companies, and have chosen to settle to avoid the distraction and expense of protracted litigation. In collaboration with the government, eHarmony has implemented a new industry standard when disclosing terms in order to make the user experience even better.’
In November, we wrote about AdoreMe, who was charged with violating the FTC Act with its negative-option membership program. The online lingerie retailer was required to more than $1.3 million to consumers for deceptive business practices. It, too, was required to obtain affirmative consent, post its terms clearly and conspicuously and provide a mechanism for easy cancellations.
Our legal advisor Lisa B. Dubrow, Esq. has written about these cases and California law requiring that companies handle automatic renewals differently, effective July 1, 2018. Read more about Dubrow’s insights and recommendations in these previous columns:
- Online Recurring Billing Marketers, Review Your Enrollment Processes Now
- California SB-313: New Law Addressing Recurring Billing Subscriptions with Free Gifts or Trials and Online Cancellations
- California Superior Court Fines Beachbody $3.6 Million
Whether they admit wrongdoing or not, when companies like eHarmony are involved in cases like this, it is detrimental to the entire subscription industry. It casts a shadow on those companies with transparent business practices who provide clear disclosures and offer easy-to-use cancellation mechanisms. For eHarmony to claim they are setting a new industry standard when these standards are already considered best practices is a stretch and minimizes their responsibility to their subscribers. These cases show that these are not just best practices anymore; they are law and all subscription companies must comply or face similar penalties.