Firms urged to take note of UK subscription contracts regime consultation

New consumer protection laws on subscription contracts, introduced by the Digital Markets, Competition and Consumers Act (DMCC Act) and which are to come into effect in 2026, aim to tackle the issue of “subscription traps”, which cost UK consumers an estimated £1.6 billion annually, according to UK government statistics. These so-called “traps” often involve consumers signing up for subscriptions through free trials or reduced price offers before being automatically enrolled in plans if they do not cancel in time. The goal of the new regime is to make it easier for consumers to cancel any unwanted subscriptions and obtain refunds.

Clare Francis, commercial law expert at Pinsent Masons, said: “The number of different goods and services which utilise subscription-based models has grown massively in recent years and is set to continue to grow. This consultation is a key period for businesses to consider the changes that are due to come into effect in 2026. We would encourage businesses to have their say.”

The new rules are intended to ensure firms provide clear information to consumers signing up to subscriptions.  Traders are obliged to provide clear pre-contract information and to send reminders about ongoing subscriptions, letting consumers know how to cancel them. The DMCC Act also provides for a 14-day cooling-off period to cancel after a trial or long-term subscription auto-renews in a bid to give consumers greater control over their subscription.

Recognising the need for businesses to review and adapt their practices before the new subscription contracts regime begins to apply in 2026, as currently expected, the UK government is now consulting (75 pages / 486 KB) on the detail of how the new regime may work in practice – including seeking views on policies for refunds and returns, with specific provisions for goods, services, digital content, and mixed contracts. The goal is to ensure that consumers can easily obtain refunds for unwanted subscriptions and that traders adhere to clear and fair refund policies “without placing unnecessary burdens on businesses”.

The consultation also considers consumer rights to refunds when a trader breaches implied terms of the contract. This includes situations where the trader fails to provide the agreed-upon services or goods, with an outline of regulatory proposals for timing and method of refund payments also noted in the consultation.

The consultation also considers how the new DMCC Act rules will operate to prevent traders from using contractual terms that make it difficult for consumers to exit a subscription - for instance, ensuring that consumers are not charged for longer than they expected or wanted. It also highlights the need for clear and straightforward processes for exiting subscriptions, reminder notices, end of contract notices, and renewal cooling-off notices.

Proposals for guidance to clarify the DMCC Act’s provisions to ensure traders implement user-friendly cancellation procedures are included in the consultation.

Tadeusz Gielas, competition and consumer law expert at Pinsent Masons, said: “The new rules will apply to businesses that sell or market goods, services, or digital content to UK consumers, including businesses located outside the UK. However, many types of subscription contracts are excluded from the new DMCC Act regime because they are already subject to other regulations, including contracts for utilities, insurance and financial services, medical prescriptions, rental of residential accommodation, and mobile phone and broadband contracts.”

Under the DMCC Act, the Competition Markets Authority (CMA) has been granted new direct enforcement powers to tackle breaches of consumer protection laws, including those related to subscription contracts. For the first time, under its new direct enforcement powers, the CMA can decide whether key consumer laws have been broken without needing to go through lengthy court processes. The CMA's new powers include the ability to impose fines of up to £300,000 or 10% of a company's global annual turnover, whichever is higher, for substantive infringements of consumer protection rules.

Angelique Bret, competition and consumer law expert at Pinsent Masons, said: “The CMA’s new powers under the DMCC Act to directly enforce consumer protection laws are modelled on the authority’s longstanding investigatory powers and procedures for enforcing competition law.  As under competition law, the CMA will now also be able to determine by itself, without court proceedings, whether or not consumer law was infringed. The CMA will also have new powers to be able to fine businesses and individuals for administrative breaches, such as failing to comply with CMA information requests or providing false or misleading information during investigations.”

Francis said: “With the increased scrutiny that comes from the CMA’s new enforcement powers it means that the reach of these changes will be wide and will impact on many businesses.”

“The CMA will expect businesses to develop and implement effective consumer law compliance programmes that embed a top-down compliance culture within the business, and which take account of the entire consumer journey,” Bret added.

Whilst the subscription contract rules are presently not expected to commence before spring 2026 at the earliest, other consumer law changes introduced by the DMCC Act – including the CMA’s new direct enforcement powers – are expected to apply as early as April 2025.

“The increased scrutiny from the CMA means that businesses will need to be more transparent in their dealings with consumers not only in relation to subscriptions, but in relation to consumer protection as a whole,” said Bret.