What's the issue?
In the ever-evolving landscape of consumer protection, recent developments highlight the need to adapt regulations to the digital age. The Committee of Advertising Practice (CAP) and the Broadcast Committee of Advertising Practice (BCAP) codes have long been stalwarts in safeguarding consumer rights, including in subscription contracts. However, the emergence of the Digital Markets, Competition, and Consumers (DMCC) Bill introduces a new era of regulatory frameworks, addressing challenges specific to the digital realm.
Whilst the Bill remains in draft form and due to go for a second reading in the House of Lords, this summary is based on the current version of the Bill – we also await secondary legislation which may give more flexibility to service providers on how they implement the requirements.
CAP and BCAP Codes: The basis of advertising regulation
The CAP and BCAP codes have been instrumental in shaping ethical advertising practices. The codes focus on:
- transparency – clear and accurate information about pricing and terms and conditions must be provided
- auto-renewal clauses – must be prominently disclosed so that consumers are aware of ongoing commitments and charges
- cancellation procedures – clear and simple procedures to cancel the subscription should be available
- honesty and fairness – advertisements should not present misleading information about the subscription
- material information – must be presented prominently in the ad
- qualification claims – must be truthful and capable of substantiation.
While effective in traditional advertising contexts, these codes encounter limitations in the digital landscape. Issues such as hidden fees in online subscription models, algorithmic biases influencing consumer choices, and the complexities of cancelling digital subscriptions are not fully addressed by the existing codes. There is also the issue that the ASA, the regulator responsible for enforcing the CAP codes, has limited enforcement powers which are generally confined to requiring the advertiser to take down the infringing ad and ensure it does not appear in the same form again.
DMCC Bill: A significant step forwards?
Recognising the gaps in existing frameworks, the DMCC Bill introduces a comprehensive set of regulations tailored to the intricacies of digital services. The Bill seeks to bolster consumer protections by establishing legal guidelines governing digital markets, with a focus on subscription providers and platforms that play a central role in online transactions.
For providers of subscription services, the DMCC Bill entails a paradigm shift. Service providers must revise their algorithms to eliminate biases that may impact consumer choices. Clear communication of terms and conditions becomes paramount, as failure to do so may result in regulatory scrutiny. Moreover, the Bill's emphasis on preventing unfair practices necessitates a re-evaluation of subscription models to ensure transparency and fairness in all interactions with consumers. The Bill aims to protect consumers from subscription traps and service providers will be required to:
- provide clearer information to consumers before they enter into a subscription contract. The Bill is prescriptive about the information that must be provided ('key' and 'full' pre-contract information)
- issue a reminder to consumers that a free trial or introductory offer is coming to an end, as well as regular reminders during the subscription and a reminder before a contract auto-renews
- offer a 14-day cooling off period when the customer enters into the contract as well as a new 'renewal cooling-off period'
- ensure consumers can exit a subscription contract in a straightforward cost-effective and timely way, without taking unnecessary steps and in a single communication. In particular, the user must be able to cancel online where they have entered into the subscription contract online.
One of the key new foundations of the Bill is that the CMA is being given heightened investigation and enforcement powers. For the first time, the CMA has the power to request information, obtain access to premises and equipment, and interview individuals. If the Bill passes in its current form, where a service provider is found to be in breach, the CMA has the power to issue significant fines of up to £300,000 or 10% of global annual turnover (whichever is the higher) – putting it on a par with regulators of personal data or financial services.
Impact on consumers
From a consumer's perspective, the Bill brings about a heightened level of protection. Algorithms that may have potentially previously influenced purchasing decisions will be under stricter scrutiny. Clearer communication from service providers regarding subscription terms and conditions, including auto-renewal and cancellation procedures, should ensure that consumers can make informed choices and exit agreements without undue obstacles. This shift is intended to align with the Government's broader goal of creating a digital environment where consumers are well-informed and protected in their interactions with digital services.
What does this mean for you?
As the DMCC Bill reshapes the regulatory landscape, it marks a crucial step in adapting to the challenges posed by digital subscription services.
For both providers and consumers, these changes signal a new era of transparency and accountability. While the CAP and BCAP codes laid the foundation for consumer protection, the DMCC Bill aims to bring these principles into a codified form that is supported by a newly-empowered regulator, seeking to readdress the balance between consumers and providers of subscription services.
