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Amendment to Israeli Consumer Protection Law
FEBRUARY 2009
The Consumer Protection Law was recently amended by the Knesset (the "Amendment") to prevent certain "limited-period transactions" from being "automatically" renewed without obtaining the consumer's prior approval. The Amendment is expected to impact the way Israeli businesses structure their membership and subscription offers (for example, offers by cellular phone operators).
A "limited-period transaction" covered by the Amendment means:
(i) a contract in respect of an on-going service with a termination date; or

(ii) a transaction for which the consumer receives a discount for a limited period of time, after which the price increases (such as gym that charges a discounted monthly payment for the first few months); or

(iii) a transaction linked to another transaction, in such a way that the price of one transaction affects the price of the other transaction (for example, the amount of payment for cellular phone conversation affects the amount of the monthly payment for the cellular phone itself).

The Amendment prohibits the service provider from automatically renewing or extending the above limited-period transaction contracts, and it obligates the service provider to notify the consumer not later than 30-60 days prior to the expiration date and receive the consumer's explicit prior consent in order to renew such contracts beyond their expiration date.

Various services that are considered essential are specifically exempted from the Amendment, such as gas services, basic phone services and can therefore be automatically extended and renewed, provided that the service provider notifies the consumer that the contract will be automatically renewed prior to the expiration date. The service provider must provide the consumer with a notification not later than 30-60 days prior to the expiration date.

 

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