Dropbox Settles Autorenewal Lawsuit

[Updated May 23, 2018] File-sharing powerhouse Dropbox has agreed to pay $1.7M to settle claims brought against it by the District Attorneys of Alameda, San Diego, San Francisco and Sonoma Counties.  The regulators alleged that Dropbox violated California’s law on automatic renewals by failing to properly disclose the terms associated with its autorenewing Dropbox Pro subscriptions and by failing to get consumers' affirmative consent to those terms. For its part, Dropbox issued the following statement through a spokesperson: "We believe that our policies have been fair, transparent, and in compliance with applicable law, but we’re pleased to have resolved this matter. Being worthy of trust is a core value of Dropbox and we’ll continue striving to earn and maintain the trust of our users." 

Dating service eHarmony feels Dropbox’s pain. In January, the company settled a similar suit over its own autorenewal practices filed by four California counties (Napa, Santa Clara, Santa Cruz, and Shasta) and the city of Santa Monica. According to the Santa Clara County District Attorney’s Office, eHarmony “did not clearly and conspicuously explain the automatically charged subscription fee, did not provide the consumer with their dating contract, or explain their right to cancel as required by law.” eHarmony agreed to pay up to $2.28M to settle the suit ($1.28M in penalties and up to $1M in restitution to customers), as well as to change its disclosure practices going forward. (For more discussion of the eHarmony settlement, as well as autorenewal compliance issues generally, please see InfoLawGroup partner Jamie Rubin’s recent article in Internet Retailer magazine.)

Subscription services have become ubiquitous in online life and with their rise in prevalence has come increased legal scrutiny. The DropBox and eHarmony settlements follow a $3.6M settlement in 2017 between BeachBody (maker of the P90X workout) and the city of Santa Monica over BeachBody’s disclosure practices regarding its autorenewal programs. The FTC was also very active on autorenewal issues in 2017, settling complaints against online lingerie retailer Adore Me ($1.3M) and app maker Pact ($1.5M, partially suspended).  As previously discussed here, many companies have also faced private suits on autorenewal issues.

The laws of many states, as well as the federal Restore Online Shoppers’ Confidence Act, set out obligations as to how businesses must disclose the terms of their autorenewal programs, secure consumer consent, accept cancellation requests, and, in some circumstances, provide notice before renewal. Companies that rely on subscription programs should familiarize themselves with the ins and outs of these laws and make compliance a priority to help avoid finding themselves mired in costly litigation.