The UK Government has accelerated the implementation of new rules to crack down on “subscription traps”, moving the deadline forward by three months to January 2027. The changes require businesses offering subscription contracts to provide clearer upfront information, send regular reminders before automatic renewal and make cancellation easier.
This article summarises the key implications for subscription contracts under the Digital Markets, Competition and Consumers Act 2024.
Practical tips
- Act now to update subscription contract terms. Don’t wait until January 2027.
- Be upfront. Don’t bury key information in lengthy terms.
- Send renewal reminders. Don’t rely on customers to remember.
- Make exit easy. Don’t require multiple steps or narrow windows.
- Confirm cancellation promptly. Don’t leave customers uncertain.
- Honour cooling-off rights. Don’t fail to inform customers of their right to cancel.
What Is a Subscription Contract?
A subscription contract is a contract between a business and consumer where the consumer receives a recurring or ongoing supply of goods, services or digital content and is automatically charged for each period or the consumer receives an initial free trial or introductory rate after which they become liable for higher payments if they do not end the contract. Common examples include streaming services, gym memberships, digital content, magazine subscriptions and meal kit deliveries.
Some specific consumer contracts are excluded from the scope of this new subscription regime. Excluded contracts include medical prescriptions, contracts for insurance and other financial services, and contracts for the supply of gas, electricity, water and other utilities.
What Are the Main Implications?
The key obligations are:
a) Pre-contract information
Businesses must provide “key” information about the subscription separately from the broader contract terms. Key information includes information such as the recurring payment obligations, payment frequency and amount, minimum total cost, how to bring the contract to an end and a summary of the consumer’s “cooling-off” rights.
b) Payment confirmation
For online contracts, the final sign-up step must require the consumer to expressly acknowledge the payment obligation.
c) Reminder notices
Businesses must send clear reminders before renewal payments. Reminders must be sent at specific intervals and contain prescribed information such as the renewal date, amount payable, price increases since the last renewal and how to cancel. For free trials or introductory offers a reminder must be sent before the first full-price payment.
d) Easy cancellation
Cancellation must be straightforward, without unnecessary steps. Guidance will be issued to clarify what this means in practice. Separately, secondary legislation will prohibit terms that make cancellation disproportionately difficult such as restricting cancellation to a narrow window or requiring excessive notice periods.
e) Cooling-off rights
Consumers can cancel during 14 day cooling-off periods without penalty. There are different types of cooling-off periods – an initial cooling-off period at the start of the contract and renewal cooling-off periods. The renewal cooling-off periods arise when the consumer first becomes liable for full-price payments after a concessionary period, or at any renewal where the next payment will not fall due for a year. The business must send a cooling-off notice at the beginning of each renewal period separately from other information. The cooling-off notice must explain (amongst other things) the consumer’s right to cancel, when the period begins and ends and the consequences of cancellation. Once a consumer cancels, the business must send an end of contract notice confirming the cancellation date and refund any overpayment.
Failure to Comply
The consequences of non-compliance depend on the requirement breached and may include the consumer having a direct right to cancel without penalty, an extended cooling-off period or the consumer not being bound by the contract.
The enforcement authority for this regime, the Competition and Markets Authority, has the power to impose monetary penalties for breaches of the subscription regime of up to £300,000 or 10% of a business’ total turnover (whichever is higher) without needing a court order.
Next Steps
Businesses should take steps to review and update their subscription contracts, customer journeys and business processes and train their staff so that they are compliant with the new regime when it comes into force in January 2027.
The new regime represents a significant shift in the regulatory landscape. Businesses that act early will be better placed to achieve compliance without disruption and to stay ahead of a regulator for which subscription practices are clearly a priority.
For further information on the new subscription contracts regime, please contact Dorothy Agnew
