The Digital Markets, Competition and Consumer Bill is proposed law which was introduced into the House of Commons in April 2023. It was re-introduced following the King’s Speech in November and is expected to come into force in late 2024.
The main purposes behind the Bill are to: strengthen the regulation of digital markets, reform competition law in digital markets, and reinforce UK consumer protection law. This article looks at some of the proposed consumer law changes.
A major area of focus for the Competition and Markets Authority (CMA) in recent years has been subscription contracts. The Bill seeks to introduce new rules in this area to address the vulnerability of consumers due to unclear cancellation processes and ambiguous terms. A subscription contract is any business-to-consumer contract for the supply of goods, services or digital content that either auto-renews unless the consumer cancels it, or has a free or discounted trial period after which payments or higher payments become necessary.
The Bill sets out a number of obligations that impact e-commerce businesses offering subscription contracts, some of which are below.
- Pre-contract information – Before a consumer places an order or enters into a contract, a business must provide the consumer with ‘key pre-contract information’. This includes information on any auto-renewal policy, the amount and frequency of payments, procedures on how to cancel, charges that apply after any initial trial and the date when the first charge becomes payable. The business must also provide or make available ‘full pre-contract information’ including details of what is being provided, the business name, address and contact information, any additional charges not included in the price, a complaints handling policy and how to access any relevant policy documents. Both sets of information must be provided in a ‘durable medium’ which means that displaying them somewhere on the website may not suffice unless they are addressed to the consumer and can be stored and retrieved.
- Reminder notices – The business must send reminder notices of renewal payments for either the first payment due after a trial period or a payment due on auto- renewal. If the subscription requires payment every six months or more frequently, a notice must be sent once every six months. If the subscription requires payment less frequently than every six months, a notice only needs to be sent for each renewal payment. The notice must be sent between three to five working days (or 10 to 14 working days for renewals of 12 months or more) before the last cancellation date. The consumer can then end the contract so that it does not auto-renew. The reminder notice must be given separately from other information and include the consequences of not cancelling, the date on which payment is due, the amount of the previous renewal payment (if any) and any increase in the renewal payment. However, the Bill does not go as far as requiring express consent to renew.
- Cancellation – Subject to exclusions, the business must provide an easy cancellation method via a single communication. E-commerce businesses must also allow the consumer to cancel online, although the consumer can choose to notify the business in any other way. If the consumer cancels, the business must acknowledge this with an ‘end of contract notice’ stating when the contract ends along with refunding any overpayments.
- Cooling-off period – The Bill stipulates that the business must provide the consumer with a 14-day cooling-off period within which the contract can be cancelled without penalty. Whilst the concept of a cooling-off period for consumers is nothing new, the cooling-off period in the Bill will also apply to a renewal after a free or discounted trial or after a renewal that commits the consumer to a further 12 months or more of subscription. The business must send a notice advising of each cooling-off period, specifying when this period begins, the right to cancel, the continuation of the subscription if it is not cancelled and the method and entitlement to a refund.
What does this mean for e-commerce businesses?
There are four main reasons why this Bill is important for e-commerce businesses. Firstly, it proposes to
address ‘subscription traps’ for consumers by requiring clearer information, reminders and means of exiting contracts. Whilst none of this is entirely new, the requirements are strengthened and the consequences of non-compliance are greater.
Although the Bill is not yet in force, it is important for any e-commerce business to review its trading terms with consumers and consider whether they comply with the Bill and to update their terms as required.
The risks of non-compliance under the Bill are greater than non-compliance under current consumer law. The CMA will be able to directly enforce any non-compliance without going to court and where a business has infringed the rules the CMA could impose penalties of up to 10% of worldwide turnover.
It will be an implied term of every subscription contract that the supplier will comply with its obligations under the Bill. If a business fails to comply, the Bill allows the consumer to cancel without fee or penalty.
If you are unsure whether your current terms and trading processes with consumers comply with the Bill and would like to have them reviewed or want more information, contact Paula Dumbill on paula.dumbill@howespercival.com or Faizal Dhada on faizal.dhada@howespercival.com or visit www.howespercival.com
