Publication
29 Sep 2023 ·
United Kingdom
Consumer protection
3 min read
The UK and EU regimes
UK and EU consumers who sign up to subscriptions for goods or services benefit from consumer protection laws governing the information that must be provided on price, contract length and cancellation and refund rights.
EU member states have been implementing the Omnibus Directive which imposes obligations relating to financial penalties for breaches of certain consumer protection laws – including some that are up to the highest possible value of 4% of a business’s annual turnover in the EU member state(s) concerned.
In the UK, if the Digital Markets, Competition and Consumer Bill is enacted, the Competition and Markets Authority will be able to enforce consumer law directly and to fine businesses up to 10% of their annual global turnover.
The CMA will also be able to direct businesses to take such enhanced consumer measures as it considers just and reasonable, without having to go to court. This could include businesses having to compensate consumers directly.
The bill also requires subscription businesses to take certain actions. Some of these are sensible steps for businesses to take anyway, if they want to adopt a consumer-friendly outlook by managing risk constructively and developing a long-term, trusted relationship with their subscribers. (Additionally, to adopt a consumer-centric model and ultimately lower the risk profile, businesses may consider obtaining the consumer’s explicit consent to enter into a subscription contract.)
Consumer Protection
Subscription businesses will need to give clearer information to consumers before they enter into a subscription contract. Lots of information needs to be provided, and there are particular requirements about how it is provided. Some of the information must be given as part of the sign-up process rather than simply being made available (for example, via a link).
Subscription businesses will need to send reminders to consumers in certain situations, including before the first renewal payment and in respect of certain subsequent renewal payments. Reminders must include certain information and be sent at certain times.
The bill includes various changes in relation to cancellation, including requirements designed to ensure that consumers can cancel subscriptions more easily. Subscription businesses will also need to give the consumer a notice acknowledging that the contract is at an end, and refund any overpayment by the consumer.
The bill proposes that consumers will benefit from new cooling-off periods whereby they can cancel the contract and potentially get a refund. There will be an initial cooling-off period when the contract begins. In certain situations, this will be followed by another cooling-off period.
The secretary of state will have various powers to amend these requirements, including changing the list of required information and extending the cooling-off periods.
While it might be good practice for businesses to adopt these measures regardless of any legislation, doing so may create significant technological and operational expense. If the bill becomes law, businesses whose current practice does not align with all these requirements may be unable to avoid that expense.
Automatic renewal
The automatic renewal of subscriptions is a subject of particular regulatory scrutiny. Regulators can be concerned that many customers are unwittingly ‘trapped’ or disadvantaged when their subscriptions automatically renew or when free trials automatically convert to paid services. Find out more in our section on Disputes.
Ethical considerations
A subscription practice may be morally questionable, even though not expressly prohibited by law. For example, a subscription business could continue to take payments from a subscriber who is not using the particular product or service for any number of reasons. In these circumstances, it could be considered to be unethical, although not necessarily an infringement of an express legal requirement.
If, however, a consumer is no longer using a particular service they have subscribed to simply because they have decided that they want the ease, or flexibility, to restart the service at any time, it is a conscious decision of the subscriber and seems less likely to be considered unethical.
