Glossary -- renewal traps, auto-renewal, procurement (April 2026)

ARL (Automatic Renewal Law)

State laws requiring vendors to disclose auto-renewal terms clearly and, in some states, to send renewal reminders. New York GBL section 527-a is the canonical example; Illinois 815 ILCS 601 is another. California's equivalent provision is in the CLRA (see below).

Auto-escalator

A contract clause that automatically increases the subscription price by a fixed percentage (typically 3-10%) on each anniversary of the contract. Compounding. Always negotiable before signing; almost never removable after. The most common predatory clause in multi-year B2B SaaS deals.

Auto-renewal

The mechanism by which a subscription automatically continues for another term (month, year, or contract period) without requiring the customer to take any action. Legal with proper disclosure in most jurisdictions. The mechanism that enables the renewal trap.

CAC (Customer Acquisition Cost)

The total marketing and sales cost to acquire one new customer, including advertising, sales commissions, onboarding, and any promotional discounts. The promo price offered to new customers is often below CAC-breakeven; the vendor recovers CAC from the rack rate in years two and beyond.

Cancel-and-resign

The tactic of cancelling a service, waiting the 'new customer' window (typically 30 days), and resubscribing at the promotional rate. Legal under US and UK law; may technically violate vendor terms of service. Works reliably for cable, SiriusXM, most antivirus, and most streaming.

Chargeback

A reversal of a credit card charge initiated by the cardholder through the card issuer. Available for subscription charges in specific circumstances: charged after cancellation, or after a qualifying dispute. Visa and Mastercard both have 120-day dispute windows from the charge date.

CLRA (Consumers Legal Remedies Act)

The California consumer-protection statute that includes auto-renewal provisions (section 17600 et seq.). Requires clear and conspicuous disclosure, affirmative consent, online cancellation for online signups, and renewal reminders. Allows private right of action with statutory damages up to $1,000 per violation.

CMA (Competition and Markets Authority)

The UK government body that enforces the Digital Markets, Competition and Consumers Act 2024 (DMCC Act) subscription provisions. Fines of up to 10% of global annual turnover for breach.

Default bias

The documented tendency for people to accept whatever option is presented as the default, regardless of whether it is optimal. First rigorously documented by Samuelson and Zeckhauser (1988); extended by Thaler and Sunstein in 'Nudge' (2008). Auto-renewal exploits default bias: the default is 'keep paying,' and cancellation requires active effort.

DMCC Act 2024

The UK Digital Markets, Competition and Consumers Act 2024, which received Royal Assent on 24 May 2024. Subscription-contract provisions commenced staggered through 2026. Requires: reminder notices, 14-day cooling-off right after renewal, clear cancellation route. Enforced by the CMA.

Early-termination fee (ETF)

A contractual penalty for cancelling a contract before its natural end date. Common in multi-year gym memberships, home security monitoring (ADT, Vivint), and multi-year SaaS agreements. Typically 50-100% of the remaining contract value. Always negotiable before signing.

FTC Click-to-Cancel Rule

The US federal rule (16 CFR 425) finalised 15 October 2024 and effective 14 May 2025. Requires: cancellation as easy as signup, annual renewal reminders, clear disclosure before billing info collected, affirmative consent for auto-renewal. Applies to negative-option marketing.

Inertia (subscription)

The tendency to remain in a current subscription state (renewing) rather than taking action to change it (cancelling). A combination of default bias, status quo bias, and the real cognitive cost of making a cancellation decision. The economic engine of the renewal trap.

Negative option

A marketing practice where inaction (not cancelling) is treated as consent to continuation and billing. Auto-renewal is a negative-option arrangement. Specifically regulated by the FTC Negative Option Rule and its Click-to-Cancel expansion.

Net-new-license pricing

A B2B SaaS pricing model where new seats or units added during a contract term are billed at full list price rather than the negotiated contract rate. Growth erodes the effective discount to near-zero within 12-18 months for fast-growing companies. A primary renewal trap in B2B.

Promo price / promotional rate

The discounted price offered to new customers for the first term (typically one year). The promo is a customer-acquisition cost. The rack rate, charged from year two, is where the vendor recovers that cost and earns margin.

Rack rate

The 'standard' or 'list' price charged after a promotional rate expires. Typically 2-5x the promo price for consumer services. Named for hotel pricing (the undiscounted room rate posted on the back of the door). The core of the renewal trap.

Retention desk / retention department

The customer-service function whose primary role is to retain cancelling customers by offering discounts. Funded from the customer-acquisition cost savings of retaining an existing customer vs acquiring a new one. The retention desk is where the real negotiation happens.

Shelfware

Purchased SaaS licenses or features that go unused. Gartner's 2024 SaaS Management Survey estimates 25-40% of mid-market SaaS spend is shelfware. Paid at full contract rate, renewed at full contract rate, never used. The leading source of B2B SaaS overspend.

Status quo bias

The irrational preference for the current state of affairs over alternatives, even when alternatives are objectively better. Documented by Samuelson and Zeckhauser (1988). Applied to subscriptions: the 'what if I need it' anxiety and the cognitive cost of re-evaluating both reinforce auto-renewal.

Then-current pricing

A contract clause allowing the vendor to set the renewal price at whatever their published list price is at the time of renewal. The most dangerous clause for buyers in a vendor's standard MSA. Counter: replace with a fixed rate or CPI-capped increase.

True-up

Annual reconciliation of actual SaaS usage against contracted usage. Overages are billed (you owe the vendor); underages are not refunded (the vendor keeps it). One-way. Common in Snowflake, Datadog, and other consumption-based or per-seat SaaS contracts.

Vendor lock-in

A situation in which switching costs -- integration work, data migration, retraining, contractual penalties -- make it economically impractical to leave a vendor even if the vendor's pricing or service has deteriorated. Lock-in is the long-term leverage renewal traps build toward.