On the 24th May 2024, the UK Digital Markets, Competition & Consumers Bill (DMCC) received royal assent and will come into effect from late 2024. The DMCC includes a number of new provisions and powers granted to the courts and the Competition and Markets Authority (CMA) to safeguard the interests of consumers.
This is one of the largest changes to consumer laws in recent years and so it is vital that businesses are aware of such changes and ensure that they are taking steps now to ensure compliance when providing both goods and services to consumers after autumn this year.
Who is affected by the reforms?
The majority of the changes to consumer laws relate to subscription services. Subscription services cover a wide range of industries and sectors including software services, magazine subscriptions and gym memberships. There is now also a huge industry built around subscription services for goods ranging from beauty products to clothing.
Any contract which renews automatically (whether weekly, monthly or annually) between a business and a consumer, which the consumer must take steps in order to terminate, and includes an obligation upon the consumer of making recurring payments will now be subject to these reforms.
What is the reasoning behind the reforms?
The reforms place upon businesses greater obligations to ensure that the terms and conditions do not amount to unfair business practices. In addition, providers of goods and services not by way of a subscription service will also fall under the reforms to cooling-off periods and tackling fake reviews.
The reforms the DMCC puts in place to consumer law ensure that consumers are better aware when entering into contracts their financial obligations; their rights to terminate agreements; have a truer picture of prices and consumer opinions of products.
What are the obligations on businesses?
As stated above, the aims of the DMCC are to provide consumers with the relevant knowledge when dealing with business. Businesses will now have a much greater obligation to ensure that consumers are aware of certain key clauses in their terms and conditions relating to cancellation, subscription prices and any other subsequent fees that they were not aware of when entering into the contract.
Providing the consumer with sufficient knowledge
For subscription services, this means highlighting to customers the following:
- that the contract will continue and automatically renew upon each renewal period
- any minimum period in which the customer is unable to terminate the contract.
- that the consumer will incur liabilities until the contract ends
- frequency of payments and the payment amount (if the payment changes based on use for example, the calculation method must be brought to the customer’s attention) for each payment or the minimum total fee amount under the contract
- any powers under the agreement to allow the business to change the amount or frequency of payments, and the notice period for such changes
In addition, where the subscription includes a free trial or initial reduced trial period, the customer must be aware of the date on which the trial ends and the fact they will be liable for the standard fee rate once the trial ends. This includes sending reminder notices before the end of a free trial (a further reminder notice will need to be sent before each renewal payment)
Where there is a free trial, or an initial reduced price period, it must also be brought to the customers attention the higher rate they will be charged unless the contract is terminated and the date on which the free trial ends and they will be liable to pay the standard fees.
Businesses must now obtain express confirmation that the customer is aware of the obligations to make payment when signing up for the subscription, without such express consent the consumer will not be bound to any such contract. This can easily be resolved however through placing a box to be ticked by the consumer when signing up to the subscription.
Cancellation process
Another key provision is that subscription services must be easier to cancel. This includes where a subscription was entered into online, the consumer must be able to cancel the subscription online too. Businesses must ensure that their websites clearly display how to cancel their subscription in a way in which is easily identifiable to them.
Furthermore, the DMCC states that consumers must not need to take any steps which are not reasonably necessary to cancel the subscription. Although it is open to some interpretation what is reasonably necessary in this context, you should ensure that your termination process is as streamlined as possible to avoid being found to have not complied with this requirement.
Another point to note here is that if a consumer terminates their subscription, you must send a notification to the consumer acknowledging the termination and provide a refund for any over-payment, meaning any payments made for services not used following termination. Although a timeframe for such refund has not been included within this bill, it is likely that any subsequent reforms will include a timeframe and so standard refund practices should be used for the time being.
Cooling-off periods
There is now an emphasis on providing a cooling off period for subscription services. A 14-day cooling period either from the day in which the customer first receives the goods or, for services, 14 days from when the contract was entered into.
It should be noted here that such cooling-off period also applies to any renewal period. This means that if the contract has an initial period of 12 months following which there is an automatic renewal every three months unless cancelled, not only will notifications need to be sent out to the consumer when the renewal periods are coming to an end, but also the customer may terminate the contract within the first 14 days of each period meaning they will not be liable for the remaining payments due under the three month renewal period.
Therefore, you should ensure that you are sending out suitable notifications to your customers at the relevant times to ensure compliance with the DMCC.
Drip pricing
Another obligation that this bill places on businesses with consumer customers is to make the customer aware of the entire price. This means that if a customer for example buys a printer which requires a monthly subscription fee to allow for continued use by the customer, this must be made aware to the consumer at time of purchase and also included in the advertisement of such goods.
This bill goes beyond the current obligations of businesses providing such goods to also state that any further costs the consumer may wish to incur including shipping or taxes when beginning to purchase the good.
What are the penalties for failing to comply?
The reason that it is important to ensure adherence to the new consumer laws is the possible implications that you may face for failing to do so.
The DMCC grants enforcement powers to the CMA similar to that of current data protection legislation to impose monetary fines directly. In addition to this consumers may bring action against businesses for breaching the consumer laws.
Such penalties are up to £300,000 or, if higher, 10% of global turnover for the most serious consumer law breaches.
Ensuring compliance
In order to ensure compliance with the DCMM it is vital that businesses understand their need to inform the consumer of the key obligations under the terms and conditions and making them aware of their rights when entering into subscription agreements.
In addition, businesses offering subscription services will also need to send compliant notices to consumers during the required times under the DMCC.
Businesses must also ensure that their websites, advertising, and purchasing process all comply with the legislation too to avoid facing the risk of penalties.
If you have any concerns that your current terms and conditions will not comply with these changes, or would like further advice on your obligations to prepare you for the DMCC coming into force, please contact Stephensons commercial law team on 0161 696 6170 and we will be happy to assist you with this matter.
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