The Digital Markets, Competition and Consumers Act 2024 will introduce a new regime for subscription contracts with consumers. Secondary legislation clarifying the new regime and bringing it into force is still to be passed but businesses would be wise to think now about how their interactions with consumers and related processes will need to change.
The Digital Markets, Competition and Consumers Act 2024 (the Act) will introduce a new regime regulating paid business-to-consumer subscription contracts. Although the Act became law on 24 May 2024, secondary legislation is needed to clarify some aspects of the subscription regime and bring it into force. It is thought that the new regime will be applied no earlier than spring 2026, however it is not too early to think about the changes that need to be implemented.
One of the aims of the Act is to reduce the prevalence of subscription traps. These are subscription models which entice consumers to sign up using free or low-cost trial periods and then either do not alert them to the end of the trial period, auto-renew, or otherwise make it difficult for the consumer to cancel their subscription.
Once the regime comes into effect the key requirements will be follows:
- Pre-contract information: Businesses will need to provide comprehensive information to ensure the consumer can make an informed decision by helping them to understand the nature of the contract, including potential price changes, subscription termination procedures and required notice periods. This information needs to be provided separately from ‘terms of use/sale’ or similar.
- Cooling-off rights:
- Initial cooling-off period: Businesses will be required to give the consumer an initial 14-day window at the start of the subscription or free trial to cancel their subscription and receive a full refund, without any reason or penalty.
- Renewal cooling-off period: An additional 14-day cooling-off period must also be available to the consumer after each ‘relevant renewal’, including:
- The first renewal following the end of a free trial or discounted period.
- When the consumer becomes liable for a renewal payment and the next payment is not due for 12 months or more (e.g. as part of an annual subscription where the consumer pays once a year).
- When a consumer becomes liable for a renewal payment and no further renewal payments are due, but the contract continues beyond the end of the 12-month period.
- Renewal reminders: Businesses will be required to issue reminders about upcoming renewals, the right to terminate before the end of a free trial or discounted period, and at regular intervals thereafter. The rules provide that a reminder should be given every six months for monthly subscriptions. For annual subscriptions, two reminders must be given towards the end of the term.
- Straightforward termination: The consumer must be able to easily terminate the contract by providing a ‘clear statement’ of their intention to do so, without any unnecessary barriers or complications. For businesses offering online subscriptions, this means:
- Allowing consumers to terminate online and providing termination instructions online in a place where a consumer is likely to find them.
- Acknowledging online cancellation requests within 24 hours by providing the consumer with a written notice confirming when the contract was cancelled or will come to an end.
- Refunding consumers for any overpayments.
The Act introduces wide ranging enforcement powers to the Competition and Markets Authority (or CMA) who will be able to issue fines of up 10% of a company’s global turnover (without needing to go to court), as well as ordering redress and compliance measures.
If you have any questions about how the new rules may impact on your business, or more general advice about subscription contracts (whether with business customers or consumers), please contact our Commercial & Technology team at [email protected].
