The UK Government passed the long-awaited Digital Markets, Competition and Consumers Act (the “DMCC“) on 24 May 2024.
The DMCC will bring radical change to the enforcement of consumer law in the UK, introducing new powers for the CMA to issue direct fines of up to 10% of global annual turnover for breaches.
The DMCC also introduces changes to substantive UK consumer law provisions, including changes related to subscriptions, online reviews and drip pricing. This spotlight series will focus on the substantive changes to consumer law introduced by the DMCC, and how it compares to the position in the EU.
This spotlight is on the DMCC provisions related to consumer subscriptions.
Context – why the focus on consumer subscriptions?
Consumer subscriptions have been one of the big success stories of the digitisation of consumer retail. The revenue generated for businesses from consumer subscriptions in the UK are in the tens of billions and 8/10 UK consumers have at least one subscription.
The UK consumer regulator, the Competition and Markets Authority (CMA) and its predecessor the Office of Fair Trading (OFT) have had consumer subscriptions on a “watch list” for some time. The concern being that the way subscription contracts are presented and operated raise the potential for consumer harm. The OFT and CMA have carried out a number of market investigations and enforcement actions into subscriptions since 2011 including gym membership, anti-virus software, online console gaming, and dating services. Their areas of focus have included:
- lack of transparency in subscription terms information provided at initial sign-up;
- failure to notify consumers of their cancellation rights; and
- lack of notification prior to contracts auto-renewing.
The inclusion of express provisions in the DMCC to regulate consumer subscriptions clearly signals the CMA’s ongoing concerns, The CMA has indicated that non-compliant businesses failing to comply with these new rules will face enforcement action.
What are the new provisions?
The provisions apply to all subscriptions offered to UK consumers whether online or offline.
- Pre-contractual information
A trader offering a subscription must provide consumers with certain pre-contractual information set out in two categories:
- Key pre-contractual information: this includes duration of the subscription, payment amount and frequency, date of first payment, the minimum amount the consumer will be liable for under the the contract, any rights for the trader to change the amount of the payment, the consumer’s rights to cancel, when reminder notices will be given; and
- Full pre-contractual information: this includes the key pre-contractual information as well as a description of the goods / services / digital content the consumer is contracting to receive, the name of the trader, business address, email and telephone number and the trader’s complaint handling policy.
Both sets of information must be provided before the consumer enters into the contract: “as close in time to entering into the contract as is practicable” – but must be given separately.
Where the contract is entered into online the key pre-contractual information must be provided in writing and in such a way that the consumer is not required to take any additional steps to be able to read or access the information, other than the steps the consumer must ordinarily take to enter into the contract.
The full pre-contractual information must be made available to the consumer in a durable medium either before the contract is concluded or as soon as reasonably practicable afterwards.
- Customer purchase flow
Where the contract is entered into online, the button the consumer clicks to confirm the subscription (including to start any free trial) must expressly acknowledge that the contract imposes an obligation to pay. This aligns with the current requirements for online contracts set out in the Consumer Contracts Regulations 2013.
- Notification requirements
Traders offering consumer subscription contracts must provide consumers with certain notifications during the course of their subscription including:
- a notice before a free trial converts to a paid contract;
- a notice every 6 months for subscriptions with payment terms that are 6 monthly or more frequent to remind the consumer that they have an ongoing subscription and what the terms of that subscription are; and
- if payment is less often than every 6 months, a reminder notice ahead of each payment date e.g. for annual auto-renewal contracts this notice must be sent every year ahead of the renewal date.
- Cooling off / cancellation periods
The DMCC introduces important changes to market practice here. The new provisions give consumers the following cooling off periods:
- an initial 14 day cooling off period that runs from the date the consumer enters into the contract;
- a further14 day cooling off period that runs from the date any free introductory period expires; and
- another 14 day cooling off period that runs from the date any subscription renews for a period of 12 months or more.
This is a clear divergence from the way cancellation rights apply in the EU where a recent European Court of Justice Case (October 2023) held that the consumer’s cooling off right exists only once when the original distance contract is concluded (Verein für Konsumenteninformation v Sofatutor).
- Consumer’s exercise of their cooling off / cancellation right
Consumers must be able to terminate a subscription contract in a way which is straightforward and without having to take any steps which are not reasonably necessary. This means that:
- cancellation instructions must be easy to find and easy to execute (e.g. not buried in the consumer T&Cs); and
- for subscription contracts entered into online, the consumer must be able to cancel online. For example, they can’t be required to call customer service.
- Confirmation of cancellation
Traders must provide consumers with a notice confirming receipt of the consumer’s cancellation and the date the contract will come to an end. This notice must be given within 24 hours – 3 days of cancellation instructions being received, depending on the method the consumer used to cancel.
Details of how any refunds due are calculated and paid back to consumers will be provided in the forthcoming secondary legislation.
How does the position under the DMCC compare to the position under EU consumer law?
There is no EU level specific regulation of subscription contracts.
A few EU member states – France and Germany included – have implemented local legislation that regulates subscriptions. In France and Germany, these rules require a cancellation button be included on the online interface and the consumer given easy to follow cancellation instructions and a confirmation of cancellation notice.
As mentioned above, the DMCC introduces a clear divergence between the UK and the EU regarding the availability of a 14 day cancellation right at the end of a free trial period and on renewal of 12 month subscription terms.
Next Steps
With the introduction of significant new enforcement powers for the CMA, including the potential for fines of up to 10% of global annual turnover for breach of consumer law, and the clear focus on consumer subscriptions, there is a clear incentive on traders to ensure consumer contract onboarding and management processes are compliant with the new rules set out above.
Secondary legislation is still needed to clarify some of the provisions (for example how refunds on cancellation during a cooling off period are to be managed) and to confirm the date when these new provisions will come into force. The Department for Business and Trade have indicated that the secondary legislation will be published in Summer 2025 and the subscription measures themselves will not come into force before Spring 2026. We nevertheless recommend beginning to think carefully about your compliance plan to align existing practices with the new rules. For further practical advice on implementing these new rules, please reach out to our Consumer and Regulatory Investigations team.
