Subscription traps are common in the UK, but a new bill may change that.
What are subscription traps? It’s simple. Subscribers sign up for a free or low-cost trial only to find themselves locked into expensive repeat payments. And it’s often very difficult to unsubscribe and escape the trap.
According to Citizens Advice, more than £300 million is spent on unused subscriptions yearly, and one in five people has found cancelling a subscription difficult.
But a new draft bill introduced in Parliament is expected to help regulate this and protect consumers from subscription traps. Let’s find out how.
What is the Digital Markets, Competition and Consumers Bill?
The UK Government introduced the Digital Markets, Competition and Consumers (DMCC) Bill draft on 25th April 2023. This bill intends to encourage growth in the UK economy and protect consumers from unfair practices.
The DMCC Bill focuses on three core areas:
- Update the UK’s competition and consumer rules to reflect modern consumer habits and a more digital economy.
- Boost competition and increase customer choice. It will do this in various ways, including limiting large mergers, which could harm businesses and consumers in the UK.
- Reform the process of the Competition and Markets Authority (CMA) investigations and enforcement of existing rules on competition.
The DMCC Bill proposes that the Digital Markets Unit (DMU) within the CMA will oversee the enforcement of these rules and that the DMU will have the right to determine when consumer laws have been broken instead of needing to take all cases to court.
Rules will be established to stop firms with Strategic Market Status from unfairly exploiting their power. The CMA will also be able to promote free, open markets, encouraging companies to innovate and provide consumers with more choices.
On top of that, the DMCC bill will update consumer laws to increase consumer protection and make it easier for them to manage subscriptions while working with the tech industry to tackle fake reviews. Specifically, the DMCC Bill aims to prevent businesses from taking the following unethical actions:
- Incentivising or commissioning anyone to write a fake consumer review of their products or services
- Hosting reviews without verifying that they are true, accurate, and written by consumers via reasonable means
- Offering to commission or submit fake reviews
Cracking down on fake reviews will protect consumers from misinformation that might lead them to subscribe to a service. People will be able to research subscription companies online with more peace of mind. These new rules should incentivise companies to provide all subscribers with a high-quality experience and generate positive word of mouth instead of relying on fake reviews to win new business.
What will the DMCC Bill mean for subscription commerce companies?
One of the most important elements of the DMCC Bill is its proposed action against subscription traps. It’s expected to reinforce the CMA’s effectiveness in tackling these and other unfair practices, which should make the subscription business model even more appealing to consumers than it is already.
According to the DMCC Bill, companies that provide subscription services to consumers must:
- Provide consumers with clearer information before they enter into a subscription contract. This will reduce the risk of people being charged for subscriptions they don’t realise they have. It will also help create stronger trust between consumers and companies.
- Remind subscribers when a free trial period or low-cost introductory offer is ending and send a reminder before a contract renews automatically. Subscribers will be less likely to lose money on products or services they no longer want.
- Give subscribers a straightforward, cost-effective, and timely way to get out of subscription contracts. As a result, consumers should feel more positive towards subscription companies after their contract ends. Those consumers might sign up again in the future, whereas subscribers who have a negative offboarding experience are unlikely to return.
This will apply to subscription businesses with digital activities linked to the UK. Essentially, that refers to companies that meet any of the following criteria:
- Have a significant number of UK-based users
- Are located in the UK
- Conduct activities likely to make a substantial impact on trade in the UK
However, only companies that generate a global turnover of over £25 billion, or a UK turnover of over £1 billion, will be affected.
Subscription businesses that breach the rules will face heavy fines. The bill will allow the CMA to fine companies as much as 10% of their global turnover.
Similar subscription regulations have been put into effect in other countries. For example, subscription companies in Germany are subject to stringent German and EU regulations. As a result, businesses providing online subscriptions must make it easy for subscribers to cancel with a cancellation button. This must be on the same site offering the subscription services and must always be available.
In the United States, California’s updated auto-renewal laws require companies offering subscription services in the state to notify subscribers that auto-renewal is enabled.
What’s next for the DMCC Bill?
The DMCC Bill will progress through Parliament, where it will need to be approved. It may also be subject to secondary legislation. According to Parliament, this process involves filling in the details of a bill to ensure that it can be enforced and operated effectively. This can be used to establish a date for a bill’s provisions to take effect or to adjust existing laws.
The DMCC Bill has the potential to provide UK consumers with a safer, fairer experience when signing up for subscription services. It will also encourage companies to operate ethically when onboarding and offboarding subscribers. More clarity will prevent subscribers from becoming trapped in contracts they didn’t realise they signed up for and help them cancel subscriptions more easily.
If you run a subscription company or plan to launch one, you need to keep track of the DMCC Bill. The Limio blog is a fantastic place to stay updated on this and other subscription legislation news. Limio’s experts offer regular insights, tips, and advice to help subscription companies succeed.
Looking to improve your subscription offerings and staying compliant with subscription legislations? Limio can help! Request a demo to see Limio in action.