New York Seeks to Enforce Click to Cancel Law Against Sirius XM

I recently booked a hotel in Miami using a website. Hotels were outrageously expensive in Miami, and the deal I found only was about $100 cheaper than what I found using my usual travel sites (but still shockingly expensive). At every opportunity, the site invited me to sign up for additional “benefits,” and at every opportunity, I declined. Or so I thought.

Then my credit card company notified me of a suspicious charge. The website was charging me $15/month for membership benefits. The payment was declined, and I went back on the site to cancel. It was no easy process. I had to find the site in my e-mail folder, recover my password, which I had had to create in order to book my hotel room, and then navigate to the appropriate spot on the website to cancel my membership. It was not easy. There was no obvious way to cancel. Several drop-down menus later, I found the way to cancel, but I couldn’t just cancel. I was bombarded with new offers, and I had to individually check multiple boxes, specifically declining each new offer. Only then did I cancel. Or so I thought.

The next month, I received notice on my credit card that the website had charged me $30. I went back in to the website, cancelled my membership again, let them know that I would be challenging the charges and did so through my credit card. My credit card notified me that the website had given up on its attempts at extortion. And that is that. Or so I currently think. 

As a result of this experience, and many other similar ones, I cheered when the FTC released its click-to-cancel rule, which I expect will now hibernate for at least four years. However, New York already had such a law on its books, and NY Attorney General Letitia James (right) has sought to enforce it against Sirius XM Radio Inc. (Sirius).  New York initiated special proceedings against Sirius, alleging that it made cancellation of subscriptions unduly burdensome to consumers. The only way to do so is to speak with a live agent, and the live agent will then initiate a multi-step process for cancellation. Sirius responded that many customers are merely calling to threaten cancellation in order to negotiate a discount on services. Oy. I recently had this experience when I switched Internet providers. I wish I could bill them for my time. I’m switching because your service is unreliable. I don’t want cheaper, unreliable service. I’m done, do you hear me? Done!

The Action was brought under Executive Law § 63(12) and General Business Law §§ 349 and 527. Both parties asked for summary judgment, and the Supreme Court for New York County issued its opinion last November in People v. Sirius XM Radio Inc. The Court agreed with the People that, because Sirius is a New York corporation and the operative agreements are governed by New York law, out-of-state customers’ transactions can be subject to actions brought by the New York AG. However, the Court sided with Sirius that transactions between out-of-state customers and out-of-state Sirius agents are not covered. Affidavits of out-of-state customers are nonetheless relevant to the action.

After dismissing Sirius’s arguments based on the Dormant Commerce Clause, the Court addressed the People’s fraud claim. Sirius claims that customers can “cancel at any time.” In fact, in order to do so, they must listen to a script read by one of Sirius’s agents. Sirius insists on the truth of its statements. Customers have to listen as Sirius makes a sales pitch, offering a new deal, but they may indeed cancel. The Court found this, perhaps frustrating, but not deceptive, even from the imagined perspective of an ignorant, credulous customer. Nor does the sales pitch and the incentives Sirius pays its agents for encouraging customers to stay create an atmosphere conducive to fraud. Agents are told that “it’s ok to let a customer leave.“

The § 527 claim relates to a New York requirement that businesses provide a convenient method of cancellation of automatic renewals. Because Sirius has a toll-free number that customers may use for this purpose, it is in compliance with the statute.

However, the Court found that Sirius violates the Restore Online Shoppers’ Confidence Act (ROSCA). Here the FTC’s guidance played a key role in the Court’s decision. ROSCA requires that a seller “provide[] simple mechanisms for a consumer to stop recurring charges from being placed on the consumer’s credit card, debit card, bank account, or other financial account.” The FTC suggests that “simple” means that it should as easy to cancel a recurring charge as it is to incur one. The matter is simple, one that the court could resolve at the summary judgment stage.

Sirius customers can sign up through the Internet without having to speak to a live agent. Is speaking to a live agent less simple? Yes. You have to wait for an available agent. Then, you have to listen to a sales pitch. Sirius subscribers may receive as many as seven different offers before the agent finally relents and allows them to cancel. 

The Court thus granted summary judgment to Sirius on four of the People’s causes of action, but it granted summary judgment to the People on the fifth cause of action. Sirius will have to pay damages for its violation of ROSCA. Presumably there will also be a positive injunction, but there are no details. I wonder if the parties now sit down to figure out how Sirius can make it as simple to cancel its services as it is for people to sign up for them.