UK Digital Markets, Competition and Consumer Bill could have major impact on subscription providers

Given the wide range of products and services that consumers can subscribe to, providers must comply with a number of separate rules and regulations that prohibit unfair commercial practices, set out the rules for collection and processing of subscribers’ personal data and suggest how businesses should advertise their offerings. The UK’s Competition and Markets Authority (CMA) also actively enforces consumer protection law and has previously investigated auto-renewal subscription contracts involving anti-virus software and published guidance in this area.

Despite these well-developed consumer protection measures, subscription customers can still be exposed to poor business practices, such as auto-renewal policies that lock them into a subscription indefinitely, or the use of lengthy terms and conditions (T&Cs) sections to bury important information.

The Digital Markets, Competition and Consumer Bill

In an attempt to tackle these issues, as well as several others facing consumers, the former Department for Business, Energy and Industrial Strategy (BEIS) launched a consultation on reforming competition policy, consumer rights and consumer law enforcement in July 2021.

Just under a year later, the government published its response to the consultation and announced its intention to legislate in several areas relating to subscriptions. The draft Digital Markets, Competition and Consumer Bill was included in the Queen’s Speech in 2022, and the chancellor has since confirmed that the government will put it before MPs at some point in the current parliamentary session.

The Bill is expected to significantly strengthen the consumer protection enforcement powers of the CMA and align them more closely with its powers under competition law. For example, the CMA will be able to determine without a court order when consumer law has been infringed and to fine companies up to 10% of global turnover, and individuals could also be fined up to £300,000 for breaching consumer protection rules. In addition, the CMA will be able to require businesses to compensate consumers and make changes to their business practices to improve compliance.

Reforms to subscription rules

As part of the forthcoming Bill, the government intends to require subscription providers to provide clearer information to consumers before they enter into a subscription contract, a move that will help to ensure that consumers are not inadvertently locked into auto-renewing contracts. The Bill would also create a specific requirement for subscription providers to ensure that their consumers are able to cancel a subscription just as easily as they were able to sign up to it.  Ministers would also like to introduce a specific requirement on subscription providers to send reminders to consumers before their contract auto-renews onto a new term and before a free trial comes to an end. .

The government has, however, chosen not to take forward proposals that would have made opting-in for auto renewal of a subscription a specific legal requirement. A number of other key issues were raised in the consultation which ministers are yet to clarify. For example, it is not clear what additional pre-contract information would be required for subscription contracts, and at what stage in the order process it would be needed. The consultation proposed that subscription providers should disclose specific information both at an early stage in the processand  immediately before the consumer places their order.

Similarly, it is not known which types of contracts will be excluded from the scope of the new legislation. The consultation proposed excluding contracts for goods, services and digital content, where an interruption to supply could result in serious harm to consumer welfare – like contracts for the supply of medicines or insurance contracts. The level of detail subscription providers will have to include in their reminders also remains unclear.

Next steps

It will be interesting to see whether the government will choose to align this new piece of legislation with existing consumer protection legislation or whether it takes a novel approach. Although the proposals are only high-level commitments at this stage, the tightening of measures in this area will be significant for businesses that are reliant on subscription models.

Businesses should start considering the likely implications very carefully and could be taking certain steps now, including:

• Conducting a review of their customer marketing and sign-up journey, to make sure that it contains no false or misleading claims;
• Starting to develop systems that ensure customers are given auto-renewal reminders in good time; and
• Ensuring that their T&Cs contain a mechanism that makes it just as easy for the customer to exit the contract as it was for them to enter into it in the first place.

Co-written by Craig Turner of Pinsent Masons.