ECJ ruling on withdrawal rights in free trials and auto-renewals in e-commerce

What happened?

The judgment of the Court of Justice of 4 October 2023 deals with the question of whether the consumer has a right of withdrawal under distance selling law in the case of a free trial period followed by chargeable use, as well as in the case of automatic renewal of contracts for online services.

What is it about?

The case between a consumer protection association and an online learning platform offering its services in Austria raises interesting questions about the right of withdrawal: Is there a new right of withdrawal after the end of a free trial period or an automatic contract extension? In the present case, the consumer was able to try out a learning platform free of charge for a trial period of 30 days and to terminate the contract without notice at any time during this period. At the end of the trial period, the free subscription automatically became a paid subscription. This paid subscription, in turn, was automatically renewed for a certain period of time if it was not cancelled in time. The plaintiff argued that the consumer had a right of cancellation not only at the beginning of the paid phase, but also at the time of the conversion from a free to a paid subscription and at each renewal. At the heart of the case is the interpretation of Art. 9(1) of Directive 2011/83/EU in the context of distance contracts.

What is the legal situation?

According to Art. 9(1) of Directive 2011/83/EU, consumers have a 14-day right of withdrawal from distance and off-premises contracts. Information on this right must be provided in accordance with formal requirements. In the present case, the plaintiff argues that the consumer has a right of withdrawal upon conversion of the trial subscription into a regular subscription and upon renewal of the regular subscription, as it is not limited to the initial conclusion of the contract. The previous decisions of the Austrian courts show different interpretations of these provisions.

What does the Court say?

The European Court of Justice stated in its judgment of 5 October 2023 that the consumer's right of withdrawal exists, in principle, only once, when the original distance contract is concluded. The aim of the right of withdrawal is to compensate for the disadvantages of distance selling, namely the inability of the consumer to inspect and test the goods before buying them. This objective is already achieved by a single right of withdrawal. However, it is a precondition that the consumer is informed in a clear and comprehensible manner that the subscription will become chargeable after a free initial period and what the total price will be. If this is not the case, the consumer must be granted a new right of withdrawal.

The Court emphasised the importance of the right of withdrawal for consumer protection and the need for clear, comprehensible and explicit information on the right of withdrawal before the conclusion of the contract. In the specific case, the national court must now assess whether the online learning platform correctly informed consumers in accordance with Directive 2011/83/EU.

What are the consequences of the ruling?

The Court's decision provides legal certainty for companies wishing to offer consumers a free trial licence/subscription at the start of a subscription. However, as a precaution, information practices should be reviewed to ensure that consumers are clearly and transparently informed about the exercise of the right of withdrawal and the total cost.

What happens next?

The case raises important questions about the interpretation and application of consumer protection law in the digital economy. The Court's judgment has provided important clarification on these issues, which are important for both consumers and businesses.