Subscription services are now a regular part of daily life, from streaming platforms like Netflix to meal kits such as HelloFresh and fitness apps like Strava Premium. While these services offer convenience, many consumers find themselves locked into unwanted subscriptions due to complex cancellation processes and automatic renewals.
In the UK, there are 155 million active subscriptions in non-regulated sectors, generating £26 billion annually. Alarmingly, an estimated £1.5 billion is taken unintentionally each year from consumers through unwanted subscriptions. Amid the ongoing cost-of-living crisis, the UK government is tightening regulations to enhance consumer protection and impose stricter requirements on businesses.
Understanding Subscription Contracts
A subscription contract is an agreement where payments are automatically and regularly deducted for goods, services, or digital content. Many of these contracts begin through in-app purchases or free trial periods. However, businesses often use persuasive marketing tactics and seamless payment integrations to make signing up far easier than cancelling.
To address this, the Digital Markets, Competition and Consumers Act 2024 (DMCCA) was introduced in May 2024, with secondary legislation expected later this year. The DMCCA introduces new rules governing subscriptions, replacing parts of the Consumer Contracts Regulations 2013.
Key Changes Under the DMCCA
1. Clearer Pre-Contract Information
Before a consumer subscribes, businesses must provide clear, upfront details about:
- Payment frequency and renewal terms
- Cancellation procedures
- Cooling-off rights
This information must be presented clearly and separately before sign-up and confirmed in a durable format (e.g., email or document).
2. Cooling-Off Periods
Consumers will have the right to cancel within 14 days of signing up and receive a full refund, without penalty. This also applies to renewals that commit consumers to another 12-month term. Businesses must inform consumers of this right in writing.
3. Mandatory Reminder Notices
Companies must send reminders to consumers:
- At the end of any free trial or promotional period
- Every six months for ongoing subscriptions
These notices will improve transparency and help consumers make informed decisions.
4. Easier Cancellation Processes
Businesses must ensure that cancelling a subscription is as simple as signing up. A clear and straightforward statement of cancellation must be sufficient to end a subscription—without unnecessary hurdles.
What’s Next?
The full impact of these new regulations will become clearer once secondary legislation is released. Meanwhile, similar reforms are happening internationally.
In the US, businesses will soon be required to:
- Obtain explicit consent before auto-enrolling consumers after free trials
- Provide a ‘click-to-cancel’ option for hassle-free cancellation
While the UK has rejected a mandatory ‘click-to-cancel’ rule, it will require businesses to offer a simple online cancellation option.
A public consultation on further changes to the DMCCA closed yesterday, with additional updates expected by the end of the year.
How Can Businesses Prepare?
Companies should review and simplify their subscription models to comply with upcoming regulations. This means ensuring cancellation is as easy as signing up—whether via an app, email, or website.
Key Questions for Businesses:
- Do you automatically renew subscriptions without adequately informing customers?
- Do you require long notice periods, making cancellation difficult?
- Do you impose financial penalties that discourage cancellation?
If the answer to any of these is yes, now is the time to review and amend your subscription terms.At Berry Smith, we specialise in providing fair, commercial legal advice. Contact our Commercial Team for expert guidance on compliance with the latest subscription regulations.