Government consultation on implementation of the DMCC Act’s subscription contracts regime

Background

On 18 November 2024, the UK Government launched a consultation on the Digital Markets, Competition and Consumers Act (the “DMCC”)’s subscription contracts regime (the “Consultation”). Full details of the Consultation are set out here.

As our previous DMCC consumer law summary noted, one of the core strands of the DMCC agenda is to address the issue of subscription traps by making it easier for consumers to opt out of subscriptions. However, whilst the DMCC sets out broad policies and provisions for subscription contracts, it refers to the need for secondary legislation to be passed, in order to implement the regime.

The purpose of the Consultation is to seek views on both the proposed policies and accompanying guidance on the subscription regime. Whilst we have summarised the proposals below, the Consultation contains further explanation and is worth reviewing.

What does the Consultation cover?

The Consultation covers proposals on the following items:

Cooling-off cancellation rights - Returns and refunds

The regulatory provisions needed to implement the DMCC’s cooling-off cancellation rights, in particular:

• in which circumstances a consumer is entitled to a refund following the exercise of a cooling-off right in a subscription contract for the supply of goods, services and/or digital content.
  
  In particular, the Consultation invites respondents to comment on whether they agree with the Government’s proposed approach to cooling-off returns and refunds, which is based on the following aims:
  
  
  • ensuring that consumers maintain and do not lose a statutory right they currently have under the Consumer Contracts (Information, Cancellation and Additional Charges) and Cancellation Regulations 2013 (the “CCRs”) - even if they gain rights elsewhere;
  • maintaining the principle underlying the CCRs that if a consumer exercises a cooling-off right, neither they nor the trader should be unfairly out of pocket – for example, if a trader has already supplied a perishable product that cannot be resold and has therefore incurred non-recoverable costs, that is considered in calculating the refund;
  • factoring in the nature of the subscription, including the type of product supplied, and whether the consumer has been supplied a product in the cooling-off period before exercising a cancellation right;
  • ensuring the consumer has the opportunity to reflect on whether or not they want to continue with a contract (and be liable or not liable for ongoing payments), in keeping with the intention of the DMCC; and
  • where possible, streamlining the operation of the rules to make them more accessible to consumers and businesses.
• the trader’s rights to recover goods supplied before the contract is cancelled, depending on whether the goods are:
  • (a) returnable;
  • (b) non-returnable due to their characteristics; or
  • (c) non-returnable due to the circumstances of their supply;
• how the cooling-off rights apply to a mixed subscription contract (i.e. a subscription contract for the supply of two or more of the following: goods, services and digital content);
• the effect of exercising a cooling-off right on a contract which is ancillary to the main subscription contract (for example, a warranty, credit agreement or insurance for the goods supplied under the main subscription contract) – in essence, proposing that the ancillary contract and the ‘head’ subscription contract become coterminous;
• extension of the statutory cooling-off periods set down in the DMCC for a consumer’s initial cooling-off right and renewal cooling-off right, where a trader fails to provide a consumer with the relevant statutory requirement information – proposing up to a maximum of 12 months; and
• the application of the cooling-off rights to contracts for the supply of particular products, primarily those where a trader would have limited ability to be compensated by re-selling the product (for example, bespoke goods, perishable goods, goods which are sealed for health or hygiene reasons and which are unsealed after delivery, and computer software which are unsealed after delivery).

Cancellation remedies for breach of duties

A consumer’s refund rights when they cancel following a breach of implied terms in the DMCC concerning the trader’s duties - being the trader’s obligations to (a) give the Key pre-contract information (as defined in the DMCC), (b) give reminder notices, (c) specify in the Key pre-contract information a reasonable time for giving a reminder notice, and (d) make straightforward arrangements, without any unreasonable steps, to enable a consumer to exercise a contractual right to end the contract.

The Consultation splits a consumer’s refund rights into the following three steps:

Calculation of refund

The consumer is presumed to be entitled to a refund of all payments made following the occurrence of a specific trader breach until such time as the consumer cancels the contract;

Application of two safeguards to protect the trader

Firstly, the trader can rebut the above presumption of a 100% refund if it can establish (on the balance of probabilities) that the consumer increased their own financial loss by taking an unreasonable amount of time to exercise their cancellation rights. Secondly, a 12-month limitation period (following the occurrence of the specific trader breach) for the consumer to cancel the contract is proposed; and

Return requirements

Where returnable, goods should be returned or collected by the trader (at no cost to the consumer).

Repayment of refunds

When and how repayments to the consumer must be made by the trader - proposing that traders issue refunds without undue delay and using the same method of payment as the consumer used for the initial transaction (unless the consumer has expressly agreed otherwise).

Where the consumer cancels a subscription contract during a cooling-off period, the Government proposes that the trader makes refunds:

• for non-returnable goods, services, digital content, no later than 14 days after the day the trader is notified of the consumer’s decision to cancel the contract; and
• for returnable goods, where the has returned the goods, no later than 14 days after the day on which the trader receives the goods back or, if earlier, no later than 14 days after the day on which the consumer evidences having sent the goods back.

Where the consumer cancels because the trader has breached a specified implied term, the Government proposes that the trader makes refunds no later than 14 days after the day on which the trader agrees the consumer is entitled to a refund.

Contractual terms for exiting a contract

Ensuring that traders do not use contractual terms which may have the effect of making a consumer pay for a subscription contract for longer than they want or expect – by making void any terms that require consumers to make renewal payments before the date on which the contract renews.

The Government also proposes that, subject to a reasonably short period of time necessary for the trader to complete the steps to end the subscription contract before the consumer becomes liable for a renewal payment, consumers should be able to exercise their contractual right to exit the contract at any time (including as soon as a subscription begins or renews).

Therefore (and as the Consultation suggests would be reasonable), it would be prudent for traders to include contractual terms which provide that the last day a consumer can contractually terminate their contract is a few days before the consumer becomes liable for the renewal payment.

In doing so, traders should have sufficient time to stop the renewal period being taken and avoid the administrative burden of having to deal with multiple refund requests.

Arrangements for exiting a contract

Clarity over the arrangements traders must put in place to ensure that consumers can easily exit their contracts – with the suggestion that exit methods should enable consumers to exit a contract within a short period and without the consumer having to contact the trader more than once.

Furthermore, the Government proposes that any offers or feedback requests a trader makes to an exiting consumer should not be a compulsory pre-requisite to a consumer exiting their contract.

Information notices

Additional requirements in relation to reminder notices (which are issued prior to consumers being charged ‘renewal payments’), end of contract notices, and renewal cooling-off notices – including ensuring that:

• the notices are given in writing and on a durable medium;
• prescribed information is given prominence and is given upfront so that it is the first information that the consumer sees; and
• the primary purpose of the communication is immediately apparent to the consumer.

Pre-contract information

Aspects of guidance that may be issued on the DMCC’s pre-contract information requirements - including ensuring that:

• the key pre-contract information is clearly and prominently visible, and accessible to consumers; and
• the pre-contract information should also be prominent to consumers, and should be formatted and written in a way that is easy for the consumer to understand.

Conclusion

The Government has stated that they welcome views from all interested parties but in particular individual traders (and their representatives) who will be in scope of the subscription rules, as well as businesses that support traders to deliver their subscription services, including e-commerce platforms.

Given that the rules governing subscription contracts are not set to commence before Spring 2026 at the earliest, the Consultation provides a timely opportunity for businesses to provide feedback and become involved in the development of the implementing secondary legislation.

The deadline for responses is 10 February 2025. If you wish to discuss a possible response to the Consultation or how the DMCC may impact your terms and conditions or customer-facing administrative processes, please contact Jason Saiban, Richard Davies or Dillon Ravikumar.