DMCC: Changes to subscription contracts with Rosie Burbidge

Overview

The Digital Markets, Competition and Consumers Act (DMCC) introduces a new regime for subscription contracts. Subscription contracts are contracts that automatically renew for an indefinite or fixed period during which the consumer incurs liability until they exercise their right to cancel.

Traders are required to provide for the following:

• Pre-contract information: to ensure consumers understand the nature of the contract, including how prices may change, how to terminate the subscription and how much notice is required for termination.

• Reminders: to issue renewal reminders and giving consumers the right to terminate before the end of a free trial or discount period, and at certain intervals thereafter.

• Termination rights: allow consumers to end a contract by giving a “clear statement” of their intention to terminate, without having to take any steps that are not reasonably necessary.

• Cooling-off period: to allow consumers to cancel the subscription and obtain a refund during an initial 14-day period, for any reason and without any penalty.

What happens if you do not comply?

The company could face fines of up to £300,000 or 10% of global annual turnover, whichever is higher.

Additionally, the DMCC introduces criminal offences for breaches of duties, including violations related to unfair commercial practices and cooling-off periods.

Action

Companies should review their terms and conditions, customer journeys and staff training. Given the fairly onerous nature of these requirements, the government has indicated this regime will not come into force until spring 2026 or later.

Further Information

Pre-contract information

Where a trader enters into a subscription contract, it must give the consumer “key pre-contract information” and give or make available “full pre-contract information”.

This includes information about the contract’s auto-renewal mechanism, the charges that apply after any initial trial period, the amount and frequency of payments, and details of how the consumer can terminate the contract.  See Schedule 1 for a full breakdown.

The key pre-contract information must be provided:

• as close in time to entering into the contract as possible;
• separately from the full pre-contract information and other information i.e., it cannot just be put in the terms and conditions or together with “full pre-contract information”;
• in writing (unless the contract is concluded orally and remotely); and
• so that the consumer does not have to take any steps to read the information (e.g. clicking on links or downloading separate documents) other than the steps needed to enter into the contract itself.

Full pre-contract information must be made available in writing and in a durable medium before the goods are delivered or services are supplied under the contract.

Reminder notices

Traders must give “reminder notices” to consumers prior to initial and renewal payments being taken.

For subscriptions without a free trial or a discounted period, reminder notices need to be issued every six months starting the day after the contract is entered into.

Where there is a free trial or a discounted period, reminder notices must be sent ahead of the first renewal payment after the free trial or a discounted period ends and then every six months thereafter.

Reminder notices must be:

• clear and prominent compared to other information given to the consumer at the same time (such as marketing), but need not be entirely separate; and must follow specific any further regulations set by the Secretary of State;
• given within the period specified by the trader in the key pre-contract information which should be in advance of the last cancellation date, giving the consumers reasonable time to decide whether to end the contract and avoid the next payment;
• where the consumer is not liable for a further payment until after a 12 month period, a further reminder notice must be given at a time which is reasonable to give them notice that they will soon become liable for a renewal payment.

The reminder notice must state;

• that the consumer will become liable for the renewal payment to  unless they end the contract;
• the renewal date and amount;
• any previous renewal payment amount and any increase in the renewal payment;
• if the consumer will incur further payments after the renewal date, including their frequency and amount;
• the minimum total amount payable (or how it is calculated) if the contract is not cancelled;
• the date of the next renewal payment (or date the contract will end if the consumer is not liable for further renewal payments); and
• the steps required for the consumer to bring the subscription contract to an end to avoid further charges, including website or email address or other contact details the steps the date action required by.

Ending the contract

When entering a subscription contract, traders must provide consumers with straightforward arrangements to end the contract and without having to take unnecessary steps. For example, consumers must be able to cancel their subscription by making “a single communication”. For online contracts, a consumer must be able to end the contract online and cancellation instructions must be prominently displayed.

Traders must also acknowledge the cancellation request with an “end of contract notice” and refund any overpayments.

The “end of contract notice” must be:

• given in writing on a durable medium; and
• set out when the contract was or will be cancelled or will end.

Unless other regulations apply, it must be provided within 24 hours of cancellation (where the consumer has cancelled online) or within 3 working days after the day on which the consumer gives notice.

A consumer can also use another method to end the contract (such as sending an email), as long as it is a clear statement setting out their decision to bring the contract to an end.

Implied terms

The trader’s duties to do these things (e.g. to provide the pre-contract information, reminder notices and to aid easy termination etc..)  will be an implied term in every subscription contract. If they are breached, the consumer may cancel the contract without penalty. Such cancellation ends all future obligations and extinguishes any related payments. Companies cannot impose penalties for such cancellations.

Cooling-off rights

Consumers have the right to cancel subscription contracts, without penalty, during the initial cooling-off period (as currently) and any renewal cooling-off period.

The initial cooling off period begins on the day the contract is entered into and ends, in the case of goods supplied, 14 days after the consumer receives the first supply of goods under the contract.  

The renewal cooling-off period begins on the day on which a “relevant renewal” occurs and ends 14 days after that date.  A “relevant renewal” is where the consumer becomes liable for a first payment following a free or promotional period or at any time when further payments are due after a 12 month period. 

This right can be exercised by the consumer making a clear statement to cancel the contract.

On cancellation, both the consumer’s and the trader’s obligations under the contract end and no penalty or charge may be imposed on a consumer.  Whether any pre-payments made by the consumer may be refunded will be determined by further regulations issued by the Secretary of State.

Traders are required to provide consumers with a “cooling-off notice” for each renewal cooling-off period. It must be given on the first day of the renewal cooling-off period or as soon as reasonably practicable afterwards and must be provided separately from other information.

The “cooling-off notice” must state the following:

• that the subscription contract is continuing;
• that the consumer has a right to cancel the subscription contract during the cooling-off period to which the notice relates;
• when the period begins and ends;
• how the consumer can cancel;
• under what circumstances the consumer may lose the right;
• the consequences including any refund, reasons that the refund may be reduced, whether the consumer is responsible for returning the goods to the trader and associated costs (if they cannot be returned by post);

Note, cooling-off rights are more onerous for traders under the DMCC than they are under the CCRs which only provide cooling-off rights in relation to distance contracts and off-premises contracts, whereas under the DMCC consumers will benefit from cooling-off rights even where they sign up to a subscription contract in store.

The DMCC does not expressly deal with the liability of the consumer where they exercise their right to cancel during the cooling-off period but have made use of the subscription. This is a key issue for traders and is something that is expressly dealt with in the existing rules set out in the CCRs. The details on return and refund rules will eventually be set out in secondary legislation and the current intention is to introduce a “use it and lose it” rule, whereby consumers lose their right to a full refund if they use a product during the cooling-off period.

The DMCC takes into account that people may subscribe to services from overseas and states that the rules will apply to overseas contracts if they have a close connection to the UK.

Key Pre-Contract Information to be provided

• notification that the contract will continue, or continue for a fixed term, unless the consumer ends the contract early;
• clarification that until the contract ends the consumer will continue to incur liabilities;
• any minimum period before the consumer can end the contract;
• that the consumer will be charged, or charged higher rates (e.g. where they have been on a free trial or promotional deal) unless they cancel before these rates apply;
• the date on which the consumer will be liable for the first charge or first higher charge;
• the frequency with which the consumer will become liable for payments;
• the minimum amount the consumer is liable for on each occasion and in total;
• whether the contract provides for changes to the frequency or amount of payments or any option for the trader to change the frequency or amount of the payments;
• the steps required for the consumer to bring the contract to an end, including website or email address and amount of notice required;
• the period within which reminder notices will be given; and
• a summary of the consumer’s right to cancel during the initial cooling off period (or if they may lose that right e.g. if product is opened/used) and any right to cancel during a renewal cooling off period.
• the fact that further details of the rights are set out in the full pre-contract information.

Full Pre-Contract Information to be provided

• all the key pre-contract information (above);
• main characteristics of the goods, services or digital content;
• the name and trading name of the trader (and anyone acting on its behalf);
• the trader’s (and anyone acting on its behalf) registered address, service address (if different), email and telephone number;
• additional delivery charges and other costs (or the fact that additional charges may be payable);
• arrangements for payment, delivery, performance and timelines;
• the complaint handling policy;
• details about consumer’s right to cancel during initial-cooling off period and renewal-cooling off period e.g.:
  • when the period begins and ends,
  • whether there will be further renewal-cooling off periods and when they will begin and end;
  • how the consumer can exercise the right,
  • under what circumstances the consumer may lose the right,
  • the consequences including any refund, reasons that the refund may be reduced, whether the consumer is responsible for returning the goods to the trader and associated costs (if they cannot be returned by post);
• a reminder of the statutory rights of the consumer under Part 1 Consumer Rights Act 2015;
• the existence and conditions of after-sales customer assistance, services and guarantees;
• existence of relevant codes of conduct (e.g. an agreement or set of rules which defines the behaviour of traders who choose to be bound by it); and
• the possibility of having recourse to an out-of-court complaint and redress mechanism and the methods for accessing it.