Auto-Renewal Confusion Leads to Class Action Against Hulu

Online streaming site Hulu.com is facing a class action lawsuit in California over its renewal policy. The suit’s been filed in Los Angeles Superior Court and claims the company failed to gather customers’ “affirmative consent” before automatically renewing memberships. The suit also claims Hulu failed to present the terms of the renewal clearly, and failed to present the terms in a way that customers could be capable of retaining, as required under California law. Plaintiff Nathan Kruger seeks to represent Hulu customers who signed up for free trials and had their accounts renewed to the paid Hulu Plus service on or after December 1, 2010.

Consumers who signed up by clicking on a “TRY HULU PLUS” button were presented with a page that lacked any of the automatic renewal terms

Hulu, in line with streaming sites such as Netflix and Amazon Prime, offers users unlimited access to streamed content for a monthly or yearly fee. When a customer’s membership is up for renewal, companies may automatically renew membership by charging the fees to the customer’s debit or credit card. While this cannot be done without the customer agreeing to it at the time of joining the service, the lawsuit alleges Hulu specifically violates several laws by presenting its renewal agreement n a confusing or unclear way. The class action complaint asserts that Hulu “failed to provide an acknowledgement that includes the automatic renewal or continuous service offer terms, cancellation policy, and information regarding how to cancel in a manner that is capable of being retained by the consumer.” It also alleges that California law requires “clear and conspicuous” text explaining renewal terms be given to consumers, which Kruger claims Hulu has failed to provide. Instead, the Terms of Use Agreement was presented as an “inconspicuous hyperlink” on Hulu’s website – and consumers who signed up by clicking on a “TRY HULU PLUS” button were presented with a page that lacked any of the automatic renewal terms.

At only $8 a month, Hulu membership hardly breaks the bank, and it’s easy to dismiss this lawsuit as a cynical grab for money, but the fact is California law lays down clear guidelines for account renewals, and it does so for a reason; companies that are trusted to bill customers repeatedly have a duty to ensure those customers have consented and continue to consent to the practice, having been fully informed of any changes in price or service. In the case of Hulu, consumers who upgraded from a free account to a paid Hulu Plus account could feasibly have failed to realize they were agreeing to a monthly fee that would continue until canceled. If this is the case, and customers were never given an acknowledgment of the agreement, then perhaps the company needs to change its ways.

It will be up to the courts, of course, to decide whether Hulu is fulfilling its legal obligations. Even if that’s the case, it never hurts to makes things clearer than ever – and perhaps this lawsuit will be a wake-up call prompting the company to make sure customers understand, once and for all, exactly what renewal really means.