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Nasir and Matt discuss how signing up for free trials can backfire for consumers and businesses. They also answer the question, "I used to occupy the space next door but I needed less space, so after I left that area the landlord rented out that extra space to someone who offers the same type of services that I do. Should I sue the neighbor or the landlord, or both?"

Full Podcast Transcript

NASIR: Welcome everyone to our podcast where we cover business in the news and answer some of your business legal questions that you, the listener, can send in to our email address which I’m going to tell you in a second. Hold on one moment. It is Boom!

MATT: Got it.

NASIR: That’s it. We should just end it. And my name is Nasir Pasha.

MATT: And I’m Matt Staub. And I guess you’d have to have a reason for sending something in the email, right?

NASIR: Yeah. Yeah, just send us a legal question.

MATT: If we ended the episode, people wouldn’t really have a reason for ever emailing us.

NASIR: That’s true.

MATT: So, we have something in Middle America today – I guess that, technically, it’s in Iowa but…

NASIR: When they say “Middle America,” do they mean…? I was always think the Midwest, but that’s not Middle America necessarily, geographically.

MATT: I wasn’t denying that Iowa is in the middle of America; I was just denying that this really had to do with Iowa.

NASIR: Oh. Yeah, same here, actually; I was saying the same thing.

MATT: Iowa is definitely Middle America. You’ve driven through there. They have the world’s largest truck stop. So, you can stop there. It’s pretty cool.

NASIR: It’s not that big. Don’t tell them I said that.

MATT: Is it the world’s largest? I think it was the world’s largest. It’s – at least – the largest in the US. Well, now I’m going to have to figure this out. I’ll figure it out before the end of the episode.
This actually is an interesting thing that I’ve always thought about because I’ve fallen victim to this in the past, that’s why I don’t make the same decisions that I used to anymore. So, free trials, and you’ll see this a lot. It always seems like a good deal and the last time I remember it happening to me was in college when I bought something at Best Buy and they said, “Hey! You want a free trial?” You know, you can get one of these free magazines for three months. I was like, “Oh, that’s a good deal.” So, I got, I think, Sports Illustrated or something for three months. And then, they just kept sending them to me after three months so I kind of figured they just screwed up. And then, I look at my credit card statement and realized that they had actually been charging me every month for this new magazine that I had apparently subscribed to.

NASIR: How many months did it take you to find out?

MATT: Oh, only one or two after the…

NASIR: Oh, that’s pretty good.

MATT: I think I noticed that, you know, it had been past three months and they were still sending it to me so I realized something was awry so I had to look up and then that’s why I realized I was getting charged. So, it wasn’t much fun.

NASIR: Yeah. I had the same problem when I was in college, too. I think I was checking my credit report and it was one of those things were, you know how there’s like and then there’s another one, like, that’s not really the real credit report, this was before that commercial, it was popular or whatever. You get your free credit report and you put in your credit card but then they started charging you afterwards. And, with that, I wasn’t even receiving anything so it wasn’t as obvious that they were charging me every month so I think it took, like, four months until I actually noticed the $30 or $40 charge per month. I was able to get most of it back, if I recall, just as a complaint to the credit card company.

MATT: Yeah, did you write them a scathing email like our Monday episode?

NASIR: Yeah, like the Harvard business… I wasn’t an attorney then. If I was, I would have been, like, I probably would have been famous by now because I probably would have made a whole fuss and got on all the social media sites.

MATT: Darn it. At least you would have some sort of grounds to be upset about it but all right. Anyway…
So, this one deals with Amazon Prime. So, they offered a free trial of Amazon Prime to people and you sign up – I guess you enter your credit card information at some point. The only problem is it auto-enrolls you into Amazon Prime after the free trial is up. So, unbeknownst to a lot of these people, they had signed up for Amazon Prime and said, “Oh, it’s great! I’m getting it for free,” and then, you know, down the road, they’re getting charged for it and I think – let’s see – customers for year-long memberships is somewhere between $79 and $99. So, you know, $100 a year, that’s a pretty significant amount.

NASIR: Oh, yeah, definitely. Yeah, I think they’d just raised it to $99 this last spring. Actually, I had Amazon Prime. We get a lot of use out of it, mainly because of that two-day shipping and I think you can watch a bunch of movies and stuff online but we don’t use that as much. But, yeah, this kind of auto-renewal aspect of things is actually… Iowa, I assume, I didn’t really look in the research of Iowa law but, frankly, like you said, this is not just because Iowa, this is pretty much in every state that, when you have this auto-renewal aspect to your contracts and you’re contracting with the consumers, California, New York, and about eight or so other states – including Illinois – have these protections from the consumer’s perspective that restrict how you can do this. I’m not aware of any law that actually outright prohibits it. But, basically, what all of them do though is make the notice of this auto-renewal a little bit more apparent.
For example, New York – or I think this is Illinois – they will actually have you mail out a separate notice containing the auto-renewal provision. I can’t remember if it’s New York. I think it’s New York, actually. And then, in other states like California, you just have to make sure that that language is very clear, it’s close to the signature, especially if it’s online. You know, we all agree to those shrink-wrap contracts and who knows what we’re signing to. For those types of contracts, it has to be very apparent. And so, it’s a little surprising that Amazon got caught up in this, but it shows you that they were pretty quick on resolving it because I think they offered all the Iowans that were involved in this a refund of quite a bit of money for them to claim.

MATT: Yeah, and they specifically made sure to say that they are denying that they did anything wrong but they’re still going to give some sort of refund. I don’t get why this is only Iowa. It seems like this would be happening all over.

NASIR: Yeah, I’d like to see what their statute is because, like you said, if it’s somehow not complaint with Iowa statute, it would probably not be compliant with other statutes around the country as well.

MATT: I mean, this whole issue of free trials is tricky so that’s why – for one – I pretty much never do it anymore. But, if you’re going to do it, you need to read the terms and conditions because I’m going to guess that in there it says, “After the trial’s gone, we’re just going to automatically roll you over into paying.” If you’re going to give your credit card information then, yeah, you’re definitely going to end up getting charged for it.

NASIR: Yeah, and I think a lot of what’s very common right now are subscription-based services and so, as a business model, right? Whether it is a software or even those boxed subscription monthly things that seems to be huge right now, we even have clients that are involved in that and, frankly, this is to your advantage anyway. Even if the law doesn’t require it, making sure that your consumers or your buyers are very aware of how these fees work is going to be better in the long run. You don’t want to be associated with, like, for example, the supplements industry and things like that that, for better or worse, has been associated with this kind of recurring charges without the consumer’s permission, and some of them even have it as their business miles. They get charge-backs and that’s okay because 99 percent of the people aren’t going to complain and it’s going to be fine.

MATT: Yeah, that’s true. Something to think about from both sides – if you’re the consumer, if you’re the business – but the more important thing from this is the Iowa 80 truck stop is the world’s largest truck stop.

NASIR: Oh, wow.

MATT: It has space for – it’s actually pretty impressive – 900 tractor trailers, 250 cars, and 20 buses. That’s a lot of space.

NASIR: Yeah, the problem is I don’t even think there is that many buses or trailers in the whole of Iowa – let alone passing through.

MATT: Well, it’s on Highway 80 which spans the entire width of the country.

NASIR: I took Highway 70 across the US but not 80.

MATT: I believe 80 runs from San Francisco to Maryland because, I think, if you get on Highway 80 right around San Francisco, it’ll have, you know when you see the signs for how far places are? Like, the next big city? It’ll have a couple and then at the bottom it has some city in Maryland, you know, thousands of miles away.

NASIR: That’s pretty neat. So long as we establish that, I’m satisfied.

MATT: All right, good.

MATT: All right, question of the day.
“I used to occupy the space next-door but I needed less space. So, after I left that area, the landlord rented out the extra space to someone who offers the same type of services that I do. Should I sue the neighbor or the landlord or both?”

NASIR: I love that question actually at the end. This is pretty common. I mean, you have a retail space that you’re renting out and whether you’re services or products or whatever, whether you’re selling pizza or – I don’t know – a copy machine place or what-have-you, you don’t want another copy machine place opening up next-door or another pizza place opening up next-door. That’s going to obviously hurt your business quite a bit – even kill it for that matter. But there’s no law or restriction that prohibits that and that’s why, a lot of times, when you negotiate your leases, there’s something that you can negotiate – a term called “exclusive use.” I’m going to use this for this purposes and no one else in your property, defined by this, may use it. That’s why also, when you sign leases, you’ll see a definition of permitted uses because, when you sign a lease, you may be prohibited. Like, if there’s already a pizza place in there, you can go there and sell all the food you want but you can’t sell pizzas. Starbucks will have that where Einstein Brothers will open up next-door and I think Einstein Brothers usually sells coffee but, if Starbucks is next-door, the lease says they can’t so their drinks are limited in that location.

MATT: This is something that the landlord should bring to their attention. So, if this is going on, then maybe it’s a bad landlord or…

NASIR: Yeah, you’re right. Even if there’s no protections, the landlord should be kind of… he or she is being kind of a jerk about it because in taking advantage of the fact that there’s no such provision and it sounds like, frankly, your landlord’s trying to get you out anyway. I’m just guessing here and no offense to this person but it seems like, okay, they were renting two spaces and now they’ve consolidated to a smaller space. And so, from a landlord’s perspective, that’s not a really good sign. They want their retail space to flourish and so, therefore, they want successful business in there and, if you’re in a situation where you’re contracting, maybe they’re looking to, you know… So, I would just assume this that, at the end of the lease, the landlord may not want to renew your lease so just a prediction there.

MATT: Or maybe the person who asked the question is just confused on what they’re doing because, if it’s a retail spot where it’s just a bunch of clothing stores…

NASIR: I suppose that’s true, but what about their question? “Should I sue the neighbor or the landlord or both?”

MATT: I don’t like any of those options, actually.

NASIR: Not even both?

MATT: Not even both, no. Well, I don’t think they should sue the neighbor or the landlord but maybe this both option.

NASIR: We don’t mean to make fun but I guess we did mean to make fun. But, just to get over saying is that, unless you have that kind of provision which, by the way, you could, there is such a provision, the proper defendant is going to likely be the landlord and not the neighbor. The neighbor may not even be aware of that provision and so the landlord’s in the best position to prevent it if that’s the case.

MATT: Right. If that provision is in there and everything and it is legitimately in breach then, yeah, the landlord’s the person you want to go after. But, I don’t know, I’m skeptical that that’s the case but I don’t want to make assumptions.

NASIR: Yeah, I was going to say I’m skeptical of that, too. But it does happen. If you have unsophisticated landlords that may not be as familiar with what’s in their leases and so forth, and who knows? Maybe it’s a different than when it was in the past or different property manager and so forth that may not be aware of that provision and did that. So, most likely neither but, if there is that provision, then, you know, talk to an attorney and consider putting some pressure on the landlord.

MATT: As always.

NASIR: As always – put some pressure on the landlord, is that what you meant?

MATT: Just saying, as always, talk to an attorney.

NASIR: Oh, yeah, yeah, do that, too.

MATT: That’s not even stuff that you and I say; it’s just whatever kind of says.

NASIR: Yeah. All right, guys. Thanks for joining us and don’t forget – I haven’t asked this in a while – don’t forget to leave some positive iTunes reviews – five stars, if you will. I know a lot of our users are on iPhones so it should be easy for them to do that. You’ve just got to take the second to do that, please.

MATT: How do you know that a lot are on iPhones?

NASIR: I ingrain a little device within each MP3 that basically tracks every single movement of our listeners. Like, I can see where each of our listeners are right now – whether they’re at home or work or anywhere. Scary, right? You can opt out just by not listening, but you can’t listen to our podcast so that’s the tradeoff!

MATT: Keep it sound. Keep it smart.

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A podcast covering business in the news with a legal twist by Pasha Law PC
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Legally Sound | Smart Business covers the top business stories with a legal twist. Hosted by attorneys Nasir N. Pasha and Matt Staub of Pasha Law, Legally Sound | Smart Business is a podcast geared towards small business owners.

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