In an increasingly digital world, consumers are purchasing more media, software, and entertainment online than ever before. But what happens when a product you thought you “owned” disappears overnight? California’s new law, Assembly Bill 2426 (AB 2426), aims to address this growing issue by tightening regulations around false advertising in the sale of digital goods.
What Is AB 2426?
Signed into law on September 24, 2024, and effective January 1, 2025, AB 2426 amends California’s existing false advertising statutes to specifically target misleading claims related to digital goods. The bill was introduced in response to a wave of consumer complaints and lawsuits involving digital products, such as games, movies, and e-books, that were advertised as purchases but later became inaccessible due to licensing changes or server shutdowns.
Misleading Language in Digital Sales
Traditionally, when consumers see terms like “buy” or “purchase,” they assume they are acquiring full ownership of a product. However, in the digital marketplace, these terms often mask the reality: consumers are merely receiving a revocable license to access the content. This distinction has led to widespread confusion and frustration.
For example, in December 2023, a major game developer delisted a popular racing game and shut down its servers, rendering the game unplayable, whether the user had purchased the physical product or a digital version. Similarly, a media conglomerate removed over 1,300 seasons of shows from its platform due to licensing issues, leaving customers without access to content they believed they had permanently purchased.
AB 2426’s Key Provisions
AB 2426 directly addresses these misleading practices by prohibiting sellers from using terms like “buy” or “purchase” in digital goods advertising unless they meet one of two conditions:
Affirmative Acknowledgment from the Buyer
The seller must obtain a clear, affirmative acknowledgment from the buyer that:
- The transaction is for a license, not ownership.
- The license may be revoked if the seller loses distribution rights.
- All restrictions and conditions of the license are disclosed.
Clear and Conspicuous Disclosure
Alternatively, the seller must provide:
- A plain-language statement that the buyer is receiving a license.
- A hyperlink, QR code, or similar method to access the full terms and conditions.
What Counts as a “Digital Good”?
AB 2426 defines digital goods broadly to include:
- Digital applications or games;
- Digital audio works including, but limited to music, podcasts, speeches, and ringtones;
- Digital audiovisual works including movies, videos, news and entertainment programs, and live events;
- Digital books;
- Digital codes including codes used to access or obtain any specified digital goods, or any additional digital goods that have been previously purchased, and promotion cards or codes that are purchased by a retailer or other business for use by the retailer’s customers.
However, the law excludes:
- Subscription-based services
- Free digital goods
- Digital goods that are permanently downloaded and stored offline, where access cannot be revoked
Why AB 2426 Matters for Consumers
This legislation is a major win for consumer rights. It ensures that buyers are not misled by false advertising into believing they own digital products when they are actually subject to licensing restrictions. By requiring transparency, AB 2426 empowers consumers to make informed decisions and protects them from unexpected loss of access.
For California residents, this law reinforces the state’s commitment to holding businesses accountable for deceptive marketing practices. It also sets a precedent that other states may follow as digital commerce continues to evolve.
Implications for Businesses
Companies that sell or advertise digital goods in California must now review and revise their marketing language and sales processes. Failure to comply with AB 2426 could result in:
- Civil penalties of up to $2,500 per violation
- Exposure to individual and class action lawsuits under California’s Unfair Competition Law
False Advertising and Consumer Protection
AB 2426 builds on California’s existing false advertising laws, which prohibit any misleading or deceptive claims in advertising. By expanding these protections to digital goods, the law closes a critical gap in consumer rights enforcement.
False advertising is not just unethical, it’s illegal. When companies misrepresent the nature of a transaction, they violate the trust of their customers and risk significant legal consequences. AB 2426 reinforces the principle that clarity and honesty must be at the core of digital commerce.
What You Should Know
At Emery | Reddy, PC, we advocate for workers and consumers who have been misled, mistreated, or defrauded. If you’ve lost access to a digital product you believed you owned, or if you suspect a company has engaged in false advertising, you may have legal recourse under AB 2426 and other consumer protection laws.
Our team can help you:
- Understand your rights under California law
- Evaluate whether you were misled by digital advertising
- Pursue compensation or legal action if warranted
Protect Your Rights
California’s AB 2426 is a landmark step toward transparency and fairness in the digital marketplace. By cracking down on false advertising and requiring clear disclosures, the law protects consumers from deceptive practices and ensures that digital transactions are conducted with integrity.
As digital goods become more central to our lives, laws like AB 2426 will play a vital role in safeguarding your rights.
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