How will the Digital Markets, Competition and Consumers Act change the law on subscription contracts?

In the pre-election parliamentary rush, the Digital Markets, Competition and Consumers Act 2024 (“DMCC”) completed its Parliamentary passage, receiving Royal Assent on 24 May. The DMCC is a wide-ranging piece of legislation, introducing changes to areas such as the regulation of digital markets in the UK, competition law, consumer rights, and the power and role of the Competition and Markets Authority.

In this article, our technology lawyer Dan Tozer will explain the changes introduced by the DMCC in relation to the provision of goods, services or digital content under subscription contracts. This will be particularly relevant for any online businesses which provide their services via a subscription model (and commonly with an initial free or discounted trial period).

Key implications for subscription contracts

The DMCC aims to ensure that consumers are always aware of the terms of subscription contracts, are reminded of the structure at key moments, and also that they have the periodic right to exit. To achieve this, the DMCC imposes the following key obligations on the business offering a subscription:

• Pre-contract information: just before the contract can be formed, there is a list of “key pre-contract information” (essentially payment, term, termination, and “cooling off” information) which has to be given to the subscriber, and, separately, “full pre-contract information” (the “key” information and all other relevant contractual information) which has to be given or made available to the subscriber. We can assume that many businesses will want to structure the sign-up process to include the “key” information on-screen and then the “full” information via a link to the relevant webpage.
• Explicit confirmation of payment: the business must ensure that the consumer expressly acknowledges that there is an obligation to pay (this is expected to apply even if there is an initial free trial, if the subscription structure automatically rolls into a paid subscription unless cancelled).
• Reminders: the business has to provide a renewal reminder before the end of a free/discounted trial period, and also a periodic reminder notice about renewal payments. Each such notice has to contain certain prescribed information, including a reminder of how the consumer can cancel the subscription.
• Easy termination: termination mechanisms must be “straightforward” and only contain “reasonably necessary” steps.
• Repeating cooling-off periods: these apply not only to the initial subscription but also to each renewal period. For annually renewed online contracts, this will mean that the consumer has 14 days to cancel at the start of the first year of the contract and another 14 days at the start of each subsequent year. The business has to inform the consumer (by providing a “cooling-off notice”) at the start of the contract and on the first day of each renewal period.

Failure to comply with any of these requirements is a breach of the contract by the business and will allow the consumer to cancel the contract.

Note that there are specific consumer contracts which are excluded from the scope of these provisions, including (amongst others) utility contracts, insurance, financial services and telecoms contracts.

Other implications for online marketing

For online business, the following competition law updates introduced by the DMCC may also have an impact:

• Drip pricing, where the price initially displayed to the consumer is increased by additional fees which are indicated as the consumer goes through the purchase process, will become illegal if any of the additional fees are mandatory for all consumers or, if a mandatory fee is variable, if the consumer hasn’t been informed how the fee will be calculated upfront. Essentially, the consumer has to be shown, upfront, the total mandatory price to be paid, or information about how the total mandatory price will be calculated.
• Fake reviews: the Consumer Protection from Unfair Trading Regulations 2008 maintains a list of “blacklisted practices” which will always be prohibited. A number of actions related to fake reviews have been added to this list, such as publishing a fake review, asking someone to write one, offering to write one, or failing to take reasonable and proportionate steps to ensure that reviews are presented in a balanced way (for example, prioritising positive over negative reviews, or by failing to disclose that a reviewer was incentivised to write a review).

It is now down to the new Secretary of State to introduce Regulations to bring the DMCC into force and provide any further specific provisions. We expect the provisions referred to above to come fully into force this autumn; businesses should be taking steps now to ensure that their processes and contractual terms are compliant.

If you have questions or concerns about the Digital Markets, Competition and Consumers Act 2024 and its impact on subscription contracts, please contact Dan Tozer.