The Digital Markets, Competition and Consumers Act (DMCCA), which passed in May 2024, provides a new regime for subscription contracts. In our article last year we analysed what an earlier version of the legislation (when it was still in Bill form) meant for those who provide subscription contracts. Here, we update that article to reflect the changes introduced by the final version of the legislation. In a separate article, we pick through the consultation on the implementation of the new regime.
What has changed?
In summary, some of the more prescriptive elements of the Bill have been softened to allow businesses greater discretion as to how they implement the new rules. The final text has also been clarified in certain areas, for example, around how reminder notices should be issued to consumers.
As anticipated, much of the final detail has been left to be finalised in secondary legislation and the first consultation on implementation of the new regime has been launched (article here). The proposals set out in that consultation give some insight into the government's direction of travel in this area. Interested parties are invited to respond to the consultation, with a deadline of 10 February 2025. The new regime is expected to apply from Spring 2026.
What contracts are caught?
There has been no change to the types of contract that are caught. The DMCCA captures subscription contracts between a trader and a consumer for the supply of goods, services or digital content in exchange for payment (free services and those paid for only with provision of data are therefore excluded), and which either:
- automatically recur for an indefinite period or for a fixed period, automatically incurring liability and which have a right to cancel, and/or
There is a long list of excluded contracts, such as those for insurance and financial services.
The extra-territorial effect of the Act has not been watered down: even if customers of a subscription service are not based in the UK, the provider will still be subject to enforcement action where it is based in the UK. Similarly, providers who offer subscription services to UK consumers will be caught be the Act.
Pre-contract information
The requirements for the provision of key and full pre-contract information and how they are treated have not shifted significantly. The main change is that the service provider must now set out in the key pre-contract information the timing for when reminder notices will be sent to the consumer to inform them that their contract is renewing or continuing (see further on this below). Our earlier article has more detail on what is required as regards pre-contract information and the consequences of failure to comply with these obligations.
Reminder notices
There has been some shift to the way in which reminder notices are delivered to consumers and the Act has become less prescriptive than the Bill was in this area. Reminder notices must be sent to the consumer to notify them that the subscription contract is going to continue and that a renewal payment will fall due.
The reminders are of the first renewal payment and of subsequent renewal payments which are either the last payment for six months or every six months after the previous notice.
The notices have to be sent in accordance with the timing for reminder notices notified to the consumer as part of the key pre-contract information (see commentary above). The Bill specified that these should be given between three and five working days before the last cancellation date before the payment will be taken. So we assume that similar timing would be considered appropriate when implementing these obligations.
If there are annual payments, there has to be an additional notice, again, to be given in accordance with the timing for reminder notices specified in the key pre-contract information. For the reminder notices, the Bill specified that they should be given between 10 and 14 working days before the last cancellation date before the contract renews for another year (which could be indicative of the timing the CMA would consider appropriate).
Not only has the timing for the giving of reminder notices been relaxed somewhat, the way in which the information is delivered in the reminder notice is less restrictive than that under the Bill. The notice has to provide specified information all together and in such a way that the specified information is "more prominent" than other information given to the consumer at the same time. This indicates that reminder notices could include other general service information or marketing.
How do providers need to enable customers to cancel their contracts?
Similarly, there have been some changes to the mechanisms by which service providers must allow customers to be able to cancel their contracts. The Act now requires that consumers must be able to bring the contract to an end:
- in a way which is straightforward, and
The requirements in the Bill for the consumer to bring the contract to an end via a 'single communication' (eg via a click of a button), or giving notice 'by any means', have gone. However, the requirement for the consumer to be able to cancel online if the contract was entered online has remained.
Similarly, cancellation instructions must be displayed online in a place where customers are likely to find them and a written end of contract notice must be given within 24 hours of the online notification of cancellation.
The customer's right to cancel for breach of the requirement to give key pre-contract information, reminder notices and cancellation in the form outlined above also remains.
What rights to cancel contracts do customers have?
The customers' rights to cancel during cooling-off periods are consistent with the drafting of the Bill and, importantly, cannot be waived or conditioned and apply more often. See the full detail in our earlier article setting out customer cancellation rights. It will be an offence to fail to provide pre-contract information about cooling-off rights.
The recently launched consultation on the implementation of these rules includes proposals for differing cancellation rights, including the waiver of cooling-off cancellation rights for the immediate supply of digital content and pro rata refunds.
The initial cooling-off period is 14 days starting the day after entering into the contract, so would apply for example during a 30-day free trial period.
We have prepared an illustrative timeline setting out the various events occurring over the lifetime of a subscription contract – please get in touch if you would like a copy.
