Clifford Chance

Businesses offering subscription services to UK consumers will need to comply with new laws on subscription contracts in force from April 2025. The Government is consulting on proposed regulations.

The new rules are intended to address concerns about so-called "subscription traps" in consumer contracts. They are set out in the new Digital Markets, Competition and Consumers Act 2024, coming into force in April 2025, to be supplemented by more detailed regulations in secondary legislation on which the UK Government is now consulting. They are in addition to the more general changes to UK consumer protection law in the Act (explained in our earlier blog post here).

Context

Subscription services are hugely popular – in goods and services as varied as beauty products, newspapers and magazines, pay TV and streaming, discount schemes, and insurance. There is no suggestion that there is anything intrinsically wrong with subscriptions; on the contrary, they are seen as a convenient way for consumers to manage services without having to worry constantly about them stopping.

The new laws address two types of subscription that can lead to "subscription traps":

• auto-renewal: subscription contracts with automatic renewal terms; and
• free trials: subscription contracts that begin with a free-of- charge "trial period", with the possibility that, without active cancellation, the consumer is bound to the subscription.

These two types of subscription contract are not prohibited under the new rules. However, businesses offering such contracts to consumers are obliged under the new rules to give the consumer certain specified rights, as regards:

• cooling off periods
• pre-contract information
• reminders before renewal  milestones
• ease of exit from the subscription.

The new rules do not apply to certain regulated services such as energy, water, telecoms and financial services where the sector regulations already deal with subscription terms.

New cooling off period

Existing consumer protection laws already provide consumers with a 14-day cooling off period after buying goods and services (with some exceptions), in which they can cancel a contract and get a full or partial refund. Under the new rules, for contracts that will automatically renew at the end of a trial period, or after a period of 12 months or more, there are additional 14-day cooling off periods, running from each renewal date.

The Government’s proposed regulations will specify when traders can require payment for goods or services already provided during the renewal cooling off period, if a consumer cancels the contract. The proposed provisions are broadly in line with the rules that already apply to the initial cooling off period after a consumer has entered a contract.

The Government is also considering removing the special treatment that currently exists for digital content providers, which allows providers to treat consumers as having waived their cancellation rights if they consent to receive digital content during the cooling off period, so they cannot "binge" on the provider’s content and then claim a partial refund.

The proposals would also extend the cooling off rules to subscription contracts for various goods and services that are not covered by the current rules, including: (i) bespoke or perishable goods; (ii) goods sealed for health/hygiene reasons or sealed audio/video recordings and software, which have been unsealed by the consumer; (iii) goods that have become inseparably mixed with other items after delivery; (iv) newspapers and magazines and periodicals; (v) passenger transport services not regulated under the Package Travel Regulations; and (iv) low value “off premises” (e.g. online) contracts.

Information and reminder requirements

Businesses will be required to give certain information to consumers before entering into a contract - e.g. how often the contract renews, frequency and cost of payments, and how to cancel.

At renewal milestones, there will be no obligation to obtain the consumer's express consent to renewal, but the consumer must be given timely reminders before the specified renewal milestone. The reminder must inform the consumer in simple terms of certain important information including the cost and features of the contract that is about to renew and the actions the consumer should take to avoid renewal.

Under the proposed regulations, businesses failing to comply with the information and reminder requirements will face significant adverse consequences, including cancellation rights for the consumer, cooling off periods extended for up to 12 months, and stronger refund obligations.

Easy exit

A principle underlying the new rules is that it should not be harder for consumers to exit a subscription contract than to enter it.

All subscription contracts must have a straightforward method for exiting the subscription, with no steps that are not reasonably necessary. For online contracts, traders will have to give consumers the possibility of exiting online, in a place that they are likely to find. The Government is proposing to require traders to allow consumers to give notice of their desire to exit a subscription contract at any time after it begins and up to a few days before the cancellation date (in these circumstances the contact would end on the renewal date, subject to any cooling off period, not the date when the consumer gives notice).

Traders will be allowed to make offers or seek feedback from consumers during the exit mechanism, provided these do not frustrate or unreasonably prolong the exit process, or consumers can opt out of them.

Non-compliance with the easy exit requirements will have similar consequences to those for information and reminder requirements.

Penalties

Breach of the new rules on subscription contracts will be subject to the direct enforcement powers of the CMA (Competition and Markets Authority) under thew Act, including fines of up to 10% of group worldwide turnover.

Next steps

The Government’s consultation, which is available here, is open until 10 February 2025.