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Baker & McKenzie LLP is a member firm of Baker & McKenzie International, a Swiss Verein with member law firms around the world. In accordance with the common terminology used in professional service organizations, reference to a "partner" means a person who is a partner, or equivalent, in such a law firm. Similarly, reference to an "office" means an office of any such law firm. © 2016 Baker & McKenzie LLP

Dra$ing(Website(Terms(and(Condi3ons(to(Avoid(Li3ga3on(in(California,(Europe,(and(Canada(

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Speakers

David Gadsden Baker & McKenzie

Lothar Determann Baker & McKenzie

Sue Gomez Sr Director, Asst General Counsel Western Digital Corp

Teresa Michaud Baker & McKenzie

Agenda

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Agenda 1.  Europe

–  EU v. National Law –  New E-Commerce Regime –  Regional v. Local Terms

2.  California –  Litigation Trends –  Statutory Requirements –  Enforceable Waivers

3.  Canada –  Canadian Anti-Spam Legislation –  Enforceable Waivers

1. Europe

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Two approaches for US companies: –  Fully localize the terms, i.e. adapt them to the laws

of the country where the sale takes place Problem: High costs and lack of uniformity

–  Keep the law of one jurisdiction as governing law Problem: Especially in case of consumers, mandatory laws might apply in addition to or override the chosen law

!  In B2C contracts: revise terms at least for compliance with mandatory laws

Localization of Terms

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US companies may be required to provide contract terms in the local language, e.g.:

–  French Toubon law requires translations –  German law does not explicitly require translations,

but if Website (or parts of it) is in German language and terms and conditions in English language only, risk that courts challenge validity of contract

!  Translate legal terms and policies into language other site content is displayed in

Translation requirements

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Consumer Rights Directive (2011/83/EU) •  Member states are required to publish national

legislation •  New laws came into force on June 13, 2014, e.g. in

Germany and United Kingdom •  Key Changes for distance sales Key Changes

Information Requirements Pay Button Right of Withdrawal Digital Content

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Information Requirements •  Information must be provided in a clear and

comprehensive manner and directly before consumer places order: main characteristics of goods and services, total price, delivery charges.

•  New/amended information obligations

Main changes under German law

Entrepreneur must additionally inform about limitations in delivery and methods of payment on website Entrepreneur must provide the following information in a clear and comprehensive manner and directly before consumer places order: main characteristics, total price, term of the contract (if applicable), minimum term of consumer’s obligations (if applicable)

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Information Requirements Example:

Weather app

http://ec.europa.eu/justice/consumer-marketing/files/crd_guidance_en.pdf

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Information Requirements

Example: Smartphone environment Information is accessible on an additional page together with the button that allows conclusion of the contract

http://ec.europa.eu/justice/consumer-marketing/files/crd_guidance_en.pdf

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EU Consumer Rights Directive (2011/83/EU) requires that online sellers must make it absolutely clear to consumers that there is an obligation to pay by using a button or a similar function labelled "order with an obligation to pay" or a corresponding unambiguous formulation such as "pay now". " non-compliance leads to invalid contract conclusion

Pay Button

Main changes under Germany law

Pay button must be labelled with "order with an obligation to pay" or a corresponding unambiguous formulation

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•  Seller must inform the consumer before the sale of a consumer’s right to withdraw from the contract within a period of 14 days. Failure to do so will extend period by 12 months.

•  Seller may use model instructions on withdrawal (not mandatory). •  Seller must inform the consumer with model withdrawal form

which can be used by consumer to withdraw from contract.

Main changes under German law

Adaption of model instructions Consumer must explicitly exercise his right of withdrawal No more right of return No eternal right of withdrawal

Right of Withdrawal

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Digital Content •  Seller must provide the consumer before the sale with

information on functionality of digital content, including applicable technical protection measures and any relevant interoperability with hardware and software that the seller could reasonably be expected to be aware of.

•  There is no cooling-off period where downloading has started (but consumer must have given express consent to start performance and acknowledged that he loses his right of withdrawal).

Main changes under German law

Introduction of new category “delivery of digital content” Information on the right of withdrawal required Consent and confirmation required to extinguish right of withdrawal before expiration of withdrawal period

2. California

Fair Credit Reporting Act

Fair & Accurate Credit

Transactions Act

Telephone Consumer

Protection Act Video Privacy Protection Act

Electronic Communications

Privacy Act

Stored Communications

Act

Cable Communications

Privacy Act RESPA ERISA ADA

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Article III Standing

May 16, 2016 – Supreme Court of the United States

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Trends in Class Actions Targeting Online Retailers ‒  Americans(with(Disabili3es(

Act(‒  Auto@Renewal((‒  TCCWNA((‒  Loyalty(Rewards(Programs(‒  Gi$(Cards(‒  Privacy(No3ces!

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ADA on the Web •  Allegations that Websites are inaccessible

to the disabled community •  Section 302(a), Title III of the ADA,

42 U.S.C. § 12101 et seq. –  California Disabled Persons Act, and

Unruh Act •  Department of Justice Guidelines •  Injunction, plus attorneys’ fees •  8 individuals = 1,409 ADA suits in 2015 •  WCAG 2.0 AA Guidelines:

–  Perceivable, Operable, Understandable, Robust

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Auto-Renewal Statute •  California Business & Professions Code sections

17600-17606 –  Notice Before Sale –  Affirmative Consent –  Retainable Notice –  Contact Information

•  « Unconditional Gift »

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TCCWNA •  Truth-in-Consumer Contract, Warranty and Notice Act •  N.J.S.A. 56:12-14, et seq. •  Shall not offer or display any

contract, warranty or notice: –  which includes any provision

that violates any clearly established legal right of a consumer or responsibility of a seller

•  Consumers and Prospective Consumers •  Applies to website terms and conditions:

–  Shelton v Restaurant.com, Inc., 214 N.J. 419, 441-42 (N.J. 2013).

•  Blanket disclaimers also a violation

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Loyalty Rewards Programs and Gift Cards •  Federal Credit Card Accountability Responsibility and Disclosure

Act of 2009 (“CARD” Act) •  State Gift Card Laws not pre-empted

–  Expiration dates prohibited (11 states) –  Fees prohibited or limited (16 states) –  Cash redemption required (9 states, different amounts) –  Loyalty programs excluded (23 states)

•  Different definitions per state •  I.e. California: thing of value given in exchange

•  State Escheatment Standards –  No exemption for gift cards (6 states) –  Exemption for gift cards (12 states) –  Exempt if no expiration (12 states)

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California Statutory Requirements for Online Privacy Policies •  California unfair competition laws •  Children’s Online Privacy Protection Act

(“COPPA“) •  California Online Privacy Protection Act

(“CalOPPA“) •  California Shine the Light Law

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California Online Privacy Protection Act (CalOPPA) How to Comply with CalOPPA?

-  conspicuously post privacy policy -  follow the policy -  online services directed to minors: not advertise certain

enumerated products and services -  enable minors to remove their own posts (but not posts by

third parties) Sanctions and Remedies under CalOPPA

-  California Attorney General, district attorneys and private parties can bring enforcement actions for violations of CalOPPA under general California unfair competition laws.

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California Shine the Light Law How to Comply with the California Shine the Light Law?

-  Refrain from sharing customers’ personal information for direct marketing purposes

-  Provide notices and disclosures: Add to home page a link with the words “Your Privacy Rights” that leads to the company’s privacy policy, and another, “Your California Privacy Rights”

-  Disclose if/how you respond to “Do Not Track” signals

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“Your Privacy Rights” “Your California Privacy Rights” Your California Privacy Rights

If you are a California resident, you can request information regarding the disclosure of your personal information by [company name] to third parties for the third parties’ direct marketing purposes. To make such a request, please send an email to privacy@company.com or write to us at [mailing address].

Data Sharing for Direct Marketing Purposes

Enforcing Online Class Action Waivers

Terms and Conditions and Dispute Resolution Clause

Class Action Waivers

An effective clause: what to do

#  Conspicuous within purchase and agreement (titles and text) #  Require affirmative consent to terms (scroll-through is best) #  Split costs or assume costs up to a maximum level #  Incorporate neutral rules (i.e., AAA Consumer Arbitration Rules) #  Consider providing an Opt-Out period #  Preserve small court claims #  Treat parties equally

Class Action Waivers

An effective clause: what not to do

•  Cannot foreclose the right to bring a claim or make initiation difficult •  Cannot avoid selection of truly neutral arbitrator •  Cannot be the result of industry-wide agreement or collusion •  Must survive traditional contract defenses of fraud, duress and

unconscionability (i.e. no meaningful choice and so unfair as to shock the conscience).

•  Cannot completely favor the party providing the clause

3. Canada

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Roadmap#

1)#CASL#Framework##2)#Enforcement#of#CASL#to#date##3)#Moving#forward:#introduc>on#of#the#private#right#of#ac>on#in#July#2017###

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CASL from 10,000 feet

•  CASL generally prohibits engaging in the following unless certain consent and formality requirements are met: –  sending a commercial electronic message (CEM) –  installing a computer program on another’s computer system –  altering transmission data in an electronic message such that it is

sent anywhere other than the intended destination •  Purpose of CASL is to educate and encourage compliance, not to

punish •  Extra-territorial reach •  Real and substantial consequences for non-compliance

© 2016 Baker & McKenzie LLP

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Consent and Formality Requirements

Formality •  Disclosure of accurate and valid contact information •  Unsubscribe mechanism - clear, prominent and ‘readily able to

perform’ at no cost to recipient

Consent •  Implied or express, however window for ‘grandfathered’ implied

consent closes on July 1, 2017 •  Consent is not presumed - for express consent, must be a positive

act (i.e., opt-in regime)

© 2016 Baker & McKenzie LLP

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More than SPAM: What is a CEM?

•  An electronic message that is designed to encourage commercial activity

–  advertisement, offer to buy/sell goods or services, promotion of business opportunity or investment

•  Must be sent to an electronic address –  e.g., email, text, IM, social media

messaging

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What are the Penalties?

•  The CRTC has the authority to levy administrative monetary penalties (AMPs) on persons who contravene CASL.

•  Maximum quantum of AMPs: –  $10 million for organizations –  $1 million for individuals

Undertakings with requirement to pay (s. 21)

Criminal fine of up to $100,000 for obstructing justice (s. 46(b))

AMP’s of up to $10,000,000 (s. 20)

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Compliance and Enforcement Trends

•  As of February 2016, the Spam Reporting Centre has received over 500,000 complaints (approx. 22,000 per month)

•  Multiple high profile undertakings – light on AMPs

•  Soft enforcement: advisories, warnings and citations

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Private Right of Action – July 1, 2017 •  July 1, 2017, private right of action to be enacted for violations

of main requirements of CASL and related privacy and competition legislation

•  Private litigant can bring application alleging they’ve been affected by the contravention of the Act

•  Damages: –  Compensatory – actual loss and expenses related to alleged

contravention –  Non-compensatory – statute based and discretionary - can

reach up to $1,000,000 per day of ongoing contravention •  Safe harbour provisions apply

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CASL Checklist: "   Determine which of your messages are CEMs or

involve the installation of computer programs in a manner covered by CASL.

"   Ensure consent and formality requirements are in place.

"   Where express consent is absent, obtain by July 1, 2017.

"   Ensure external service providers are compliant. "   Implement a compliance program. "   Review legal developments relating to CASL – very

much a work in progress.

© 2016 Baker & McKenzie LLP

Questions?

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Global Class & Collective Actions Blog Our international team boasts an array of top practitioners, known for delivering practical defense advice, tailored to the specific strengths and weaknesses of a given case. They have developed an innovative blog with commentary, news and updates on the latest class and collective actions. www.globalclassactionsblog.com

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Contact

Lothar Determann, Partner Baker & McKenzie (Palo Alto) lothar.determann@bakermckenzie.com

David Gadsden, Partner Baker & McKenzie (Toronto) david.gadsden@bakermckenzie.com

Teresa Michaud, Partner Baker & McKenzie (San Francisco) teresa.michaud@bakermckenzie.com

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