California’s auto-renewal law hits tech sector, affecting AI model subscriptions

Tech firms operating in California, including those providing subscriptions for access to artificial intelligence models, must make adjustments to their subscription policies to comply with the state’s updated Automatic Renewal Law.

With the advent of subscription plans for AI models, such as OpenAI’s ChatGPT Plus, Team, Pro and Enterprise plans; and Google’s (GOOG)(GOOGL) AI Pro and AI Ultra plans, the law affects much more than traditional streaming services. Amazon (AMZN) is also introducing Alexa+, which will cost non-Prime customers $19.99 per month. xAI, which is owned by Tesla (TSLA) CEO Elon Musk, offers subscription plans for its Grok model ranging from $3 to $40 per month.

Already considered the strictest in the U.S., the law was updated again this month and now includes “free-to-pay” conversions, which means companies offering free trials that convert to paid subscriptions are covered by the law. For example, Google AI Pro is currently offering the first month free before tacking on the $19.99 per month bill.

The changes explicitly require companies to get customers’ “express affirmative consent” for automatic renewal and would require the companies to maintain verification of that consent for at least three years, or one year after the contract is terminated, whichever period is longer.

Companies that offer software-as-a-service, or SaaS, will also be affected. This includes companies such as Microsoft (MSFT), Salesforce (NYSE:CRM), Adobe (NASDAQ:ADBE), JFrog (FROG), GitLab (NASDAQ:GTLB), monday.com (MNDY) and Oracle (ORCL). Cybersecurity firms will also have to comply, as many offer monthly and annual subscriptions. This includes names such as CrowdStrike (NASDAQ:CRWD) and Palo Alto Networks (PANW).

Apple (NASDAQ:AAPL) has already implemented a new strategy to simplify the auto-renewal policy for its product protection subscriptions. It introduced a plan today called AppleCare One for customers who own multiple devices. A key feature of the plan is the ability for customers to easily remove devices from the plan or opt out of the plan at any time.