New Compliance Standards for Selling Digital Goods in California: Understanding AB 2426

As digital media consumption grows, California’s AB 2426 introduces new legal requirements to ensure transparency when selling digital goods such as apps, games, music, and books. This law, effective January 1, 2025, addresses consumer confusion by clarifying what rights buyers actually acquire when purchasing digital products.

For more information on AB 2426 and its potential impact on your organization, contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.

The Problem: Misleading Digital Purchases

Many consumers assume that when they “purchase” digital goods, they own them outright, similar to physical products. However, sellers often only grant a revocable license, allowing them to deny access to the digital product if the buyer violates terms of service. Additionally, access can be lost if the digital platform shuts down, leaving consumers with no recourse. AB 2426 aims to eliminate this ambiguity by enforcing clear communication of what buyers are receiving in digital transactions.

What AB 2426 Requires From Sellers

AB 2426 introduces strict guidelines on how digital goods can be marketed. Sellers who advertise digital goods using terms like “buy” or “purchase” must comply with one of two requirements:

1. Affirmative Acknowledgement: Sellers must obtain explicit consent from the buyer acknowledging that they are only receiving a license to use the digital good. This acknowledgment must outline all restrictions and explain if the seller has the right to revoke access.

2. Clear Disclosure: Alternatively, sellers must provide a “clear and conspicuous” statement in plain language, informing buyers that their purchase is a license, not ownership. This disclosure must include a link or method to access the full terms and conditions.

   
   

These requirements aim to make it clear to consumers whether they are buying unrestricted ownership or a limited, revocable license.

Scope of Digital Goods Defined

The law broadly defines digital goods to include:

• Digital applications and games: Software accessed via devices like computers, tablets, or phones.

• Digital audio works: Music, spoken recordings, ringtones, or other sound files.

• Digital audiovisual works: Movies, videos, or live events with audio and motion.

• Digital books: Fiction and nonfiction works transferred electronically.

• Digital codes: Codes that provide access to additional digital content.

  
  

​​Notably, the law does not explicitly cover static digital images, creating a potential gap in its application. Additionally, services such as cable and satellite television, and other forms of broadcast television, video, or radio, are specifically excluded from the definition of digital goods under AB 2426.

Compliance for Digital Goods Sellers

Sellers of digital goods need to evaluate their marketing and sales practices to ensure compliance with AB 2426. Disclosures must be clearly presented and separate from other terms to ensure that buyers understand the nature of their purchase. Failing to comply with these requirements could result in regulatory penalties or legal claims for false advertising.

AB 2426 is a significant step toward protecting consumers in the digital marketplace. As the deadline approaches, businesses selling digital goods in California must ensure they are fully prepared to meet the new standards and avoid potential liabilities.

For more information on AB 2426 and its potential impact on your organization, contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.

Disclaimer: The materials provided on this website are for general informational purposes only and do not, and are not intended to, constitute legal advice. You should not act or refrain from acting based on any information provided here. Please consult with your own legal counsel regarding your specific situation and legal questions.

---

Richard Liu, Esq. is the Managing Counsel of ILS. He serves clients as a management-side defense lawyer specializing in employment and business litigation. Richard is also an expert on litigation prevention and compliance. He regularly advises Fortune 500 companies and startups on employment, labor, and commercial matters.

Email: richard.liu@consultils.com | Phone: 626-344-8949