Subscription contracts: consultation opens on new regime under the DMCCA

The DMCCA received royal assent in May 2024, and will have a phased implementation. It represents a wide-ranging overhaul of consumer protection legislation and major reforms to the UK’s digital markets, competition and consumer laws, but is particularly significant for businesses offering digital content or software on a subscription basis, as the Act introduces new rules regarding business to consumer subscription contracts.

In this consultation, the Department for Business and Trade is seeking views on the way the DMCCA’s subscription contracts regime will operate in practice. Accordingly, the consultation includes proposals in relation to:

• Cooling-off cancellation rights;
• Cancellation remedies;
• Repayment of refunds;
• Contractual terms and arrangements for exiting a contract;
• Information notices; and
• Pre-contract information.

The consultation can be read in full here.

As with other aspects of the DMCCA, enforcement of these new rules will be undertaken by both the UK courts and the Competition and Markets Authority (CMA). Under the new legislation, the CMA has been granted the ability to issue a wider range of enforcement and investigative orders, as well as the power to levy fines of up to 10% of a business’s annual global turnover in case of breach.

Businesses that provide subscription contracts should take note of the changes to be introduced by the DMCCA, which are summarised below:

‍Pre-contract Information. A business providing a subscription contract will have to provide the consumer with:

• key pre-contract information, which includes information about the mechanism for auto-renewal of the contract, any new or increased charges after the trial period, and details of how the consumer can terminate the contract; and
• full pre-contract information, which includes further details regarding the business’ identity, contact details and complaints handling policy, and the consequences of the consumer exercising their right to cancel during any cooling-off period.

Exiting the Contract. The DMCCA introduces legislation to help consumers end subscription contracts in a simple and straightforward way, without having to take any steps that are not reasonably necessary to end the contract.

This means that businesses must introduce streamlined and clear cancellation processes. They must also allow consumers to exit contracts by making a ‘clear statement setting out their decision to bring the contract to an end’, meaning that consumers can cancel by writing a clearly worded email to the business’ sales department.

Earlier drafts of the DMCC Bill proposed that consumers should be able to exit a contract with only a ‘single communication’, but the current wording of the DMCCA allows businesses to engage with their subscribers during the exit process and to make counter-offers to persuade consumers to stay.

Reminders. Businesses must provide consumers with a reminder when any trial or free period is coming to an end, as well as at intervals during the contract term, with these reminders being displayed more prominently than any other information (e.g. promotional or marketing information) shared with the consumer in the same notice.

Cooling-off Rights. The DMCCA gives consumers the right to cancel a subscription contract, without any penalty, during:

• the initial cooling-off period, being the first 14 days of the contract, or in the case of a contract for the supply of goods, 14 days after the consumer receives the first supply; and
• any renewal cooling-off period, being the 14 days following the expiry of a free or discounted period, or any renewal committing the consumer to a further period of at least 12 months.

Drip Pricing. New rules will require any adverts or product listings to clearly set out the total price of a product, including any fees, taxes, charges or other payments that the consumer will incur as part of the purchase, in an effort to end the practice of drawing customers in with an appealing headline price, only to later reveal further additional costs.

What’s next?

The consultation closes on 10 February 2025.

The new regulatory regime in respect of business to consumer subscription contracts is not expected to come into force before spring 2026, but businesses offering products and services on subscription models should start thinking now about any adaptations needed to align with the new regime. Particularly in view of the CMA’s enhanced enforcement powers and the potentially onerous fines that may be imposed in the event of a breach.