New Regime for Consumer Subscription Contracts
The Digital Markets, Competition and Consumers Act 2024 (DMCCA) is set to introduce a new regime which will supersede the application of the Consumer Contracts Regulations 2013 (CCRs) in regulating subscription contracts between traders and consumers.
With online consumer spending continuing to grow at a rapid rate, the DMCCA has been introduced by the Government to stamp out unfair practices and promote competition in digital markets. One part of the Act introduces a new regime for subscription contracts for the supply of goods, services and digital content under which a consumer automatically becomes liable to pay for a recurring supply over an indefinite or fixed period, or a rate that is higher than the rate which applies during an initial period (including where offered free during such period); and is free to terminate the contract before the end of the fixed period (if any) under the terms of the contract.
Examples of consumer subscription contracts include online streaming services such as Netflix and food service subscriptions like HelloFresh. However, there are certain subscription contracts which fall outside the scope of the Act including those already subject to specific sector regulation, such as utility contracts, insurance services and contracts with healthcare professionals.
Key Changes
Businesses offering consumer subscription services must ensure that they take proactive steps to address the key changes to internal processes and consumer interactions as introduced by the DMCCA including:
- Providing clear and accessible pre-contractual information to consumers prior to the formation of any contract including details of payments, auto-renewal and termination.
- Obtaining express consumer acknowledgement that the contract imposes an obligation to make payments if signed up online.
- Extending the reach of the cooling-off period from the current 14-day period for consumers upon entering a new contract, during which the consumer has the right to cancel and receive a full refund, to a ‘renewal cooling off period’ which would apply this same right for a full refund to consumers after a subscription contract has auto-renewed.
- Requiring businesses to provide consumers with reminder notices such as payment dates, auto-renewal periods or when free trials are ending.
- Enabling consumers to exit subscription contracts with ease through clear communication as to the steps a consumer can take to cancel their contract. Consumers must be able to cancel their contract without any unreasonable extra steps and ideally in a single communication.
Although the DMCCA became law on 24th May 2024, further secondary legislation is required to clarify its scope and it is suggested that the new regime won’t be fully applicable until 2026. Once operational, the Act will look to provide the CMA and the courts with increased powers to impose large fines for breaching consumer law. Accordingly, it is in the best interests of businesses who trade with consumers to carefully consider whether their subscription services are compliant with the new regime.
If you would like any further information or advice relating to farm health and safety law, please contact Karla Dooey or Hugo Ellerby from the Commercial team at Carson McDowell LLP.
*This document does not constitute legal advice and should not be relied upon as a substitute for legal advice that is tailored to your individual circumstances.
