California Restricts Use of "Buy" and "Purchase" In Connection With Digital Transactions

Earlier this week, California Governor Gavin Newsom signed into law a bill (AB2426) that restricts the use of the words “buy,” “purchase,” and similar terms, in connection with the sale of digital goods, where are there are limitations on consumers' unrestricted ownership and use of such goods. 

The new law applies to the sale of digital goods, which includes a wide variety of things that people purchase online, including, for example, games and other apps, music, videos, and books. 

Under the new law, marketers are prohibited from selling or renting digital goods using the words “buy,” “purchase,” or similar terms which communicate that the buyer is obtaining “an unrestricted ownership interest in the digital good," unless the marketer: 

• At the time of the transaction, receives an affirmative acknowledgment from the buyer that indicates all of the following:  (i) the buyer is receiving a license to access the digital good; (ii) a complete list of the license restrictions and conditions; and (iii) that access to the digital good may be revoked, if applicable.
• Before completing the transaction, the marketer must also provide a clear and conspicuous statement that: (i) states in plain language that the consumer is only getting a license to use the digital good; and (ii) includes a hyperlink, QR code, or similar method to access the full license terms. 

Importantly, the acknowledgement that the marketer is required to obtain must be “distinct and separate” from any other terms and conditions that the buyer is agreeing to. 

The law doesn't apply to the sale of goods that are advertised as time-limited subscriptions, free downloads, and digital goods that users obtain access to that can't be revoked (for example, when the good can be downloaded and used offline).  The law also doesn't apply to subscriptions for television and simliar services.