Ecommerce retailers have to stay on top of evolving legal requirements in areas where they operate. Lawyer Robert Freund, who focuses on ecommerce, told Digital Commerce 360 about some legal trends he’s keeping a close eye on.

Subscriptions and automatic renewals

Subscriptions have long been promising territory for ecommerce retailers hoping to build a returning customer base. The global subscription box market reached $26.9 billion in 2022, according to Expert Market Research. The firm expects the subscription box market to reach $74.2 billion by 2028.

However, the legality of automatic subscription renewals can be difficult to navigate, according to Freund. Subscriptions and cancellations are governed by many laws across the U.S. The 2010 Restore Online Shoppers’ Confidence Act (ROSCA) requires retailers to provide “simple mechanisms for a consumer to stop recurring charges.” In 2021, The Federal Trade Commission issued a statement warning companies about employing “illegal dark patterns” to keep customers from canceling memberships.

Because the federal law is somewhat vague, many states have adopted their own, stricter laws. The combination of federal laws, FTC enforcement, and differing state laws result in a “patchwork of laws across the country” that are sometimes inconsistent, Freund says. “If you want to comply with every law in every state, it’s very difficult if not technically impossible.”

Chatbots

Chatbots are ubiquitous in ecommerce for customer service and support. They’ve also been the subject of a wave of class action lawsuits in California over recent months, Freund says.

Since July 2019, retailers using chatbots in California must identify them to consumers under the Bot Disclosure Act. The law defines a bot as “an automated online account where all or substantially all of the actions or posts of that account are not the result of a person,” operating on “any public-facing Internet Web site, Web application, or digital application, including a social network or publication.” Failure to disclose use of a bot can result in a fine of $2,500 per violation.

One law firm is proposing a more novel case that chatbots violate California’s wiretapping laws, Freund says. Chatbots often record conversations, and according to that case it’s illegal unless a consumer gives consent. Courts haven’t ruled on the issue because it’s so new, Freund said, but it could have major implications for any brand using a chatbot.

Fake sales 

Fake sale class action lawsuits are not new, Freund says, but they’re a perennial issue for retailers. They’re also known as deceptive pricing or false pricing. Retailers can be successfully sued when they misrepresent the value of an offer, such as by portraying it as a 50% discount when the product was never for sale at the original inflated price.

Plaintiffs have filed similar lawsuits for at least 10 years, and “brands continue to get this wrong,” he told Digital Commerce 360. Macy’s (No. 17 in the Top 1000), J.C. Penney (No. 41), Sears (No. 59), Kohl’s (No. 23), and other retailers have all faced these lawsuits. Once one is successful, other plaintiffs’ lawyers can see it as “blood in the water,” Freund says, and find further cases. The Top 1000 is Digital Commerce 360’s database of the largest North American online retailers.

Retailers continually find themselves in this situation because of an awareness problem, according to Freund. Some retailers feel they have “safety in numbers,” because their competitors are doing the same thing, he says. Others aren’t willing to sacrifice the potential conversion on the chance of being sued. 

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