Tue 16 May 2023

Beware of subscription traps

Beware of subscription traps

Businesses operating consumer subscription-based models should take note of two recent developments.

CAP Enforcement Notice

Firstly, the Committee of Advertising Practice (CAP) has issued an Enforcement Notice which clarifies the rules for advertisements promoting free trials and other subscription services in advertisements appearing online. CAP recognises that the use of subscription packages has increased significantly over the last five years necessitating the need for guidance in this area. The CAP Code applies to marketing communications and the Enforcement Notice serves to address the issues of “subscription traps”, where consumers are unknowingly trapped into an enrolling payment plan after a period of free trial, currently costing consumers £1.6 billion a year.  

Where an ad for a free trial or promotional offer is offered, the CAP Code requires that it must clearly communicate all significant conditions or information which may affect a consumer’s decision to enrol. Failing this, it is likely that the rules will be breached.

The Enforcement Notice explains that ads for free trials or subscription offers must detail:

  • Unless cancelled, whether a paid subscription automatically begins after the trial;
  • The financial commitment of the renewal of the subscription if it is not cancelled during the trial; and
  • All other significant conditions, such as the costs of participation.

Providing further clarity to advertisers, the Enforcement Notice explains that the significant conditions in an ad or promotion must:

  • Be instantly visible, obvious and distinct from other information.
  • Be clear in both size and font.
  • Immediately follow the most prominent references to the offer or trial.

It will not be enough to communicate significant conditions via pop-ups.

Please see below the figurative illustration provided by the Enforcement Notice to further aid in how best practice will be met.

By contrast, CAP has provided the below illustration which would not be acceptable in complying with the CAP Code.

The Enforcement Notice acknowledges recognises that in some cases (for example, sponsored ads on very small banners or on search engine sites), digital promotions may be subject to time and space constraints. In such cases, as much information about the significant information must be given, such as an image clearly depicting the relevant conditions. In these limited circumstances, the significant conditions can be referenced in another source to which the consumer is directed. Nonetheless, CAP notes that an advertiser’s own website, e-mail, social media post, leaflet or poster will not be limited by time or space constraints.

Where subscription services are offered, digital advertisements should be reviewed in line with the Enforcement Notice and changes adopted, where necessary. Targeted enforcement action will follow for non-compliant advertisers.

Digital Markets, Competition and Consumers Bill

In the second recent development, the requirements of the Enforcement Notice will be further supported by the new Digital Markets, Competition and Consumers Bill (Bill 294 2022-23) which was introduced to the UK Parliament on 25 April 2023. The bill proposes to make substantive changes to subscription contracts by requiring advertisers to remind consumers before a free trial period or offer finishes or where a contract is planned to renew. It is intended that there will be binding rules allowing consumers to exit a subscription simply and new requirements for consumers to be provided with key information.

The bill will also disapply the cancellation requirements for subscription contracts detailed in the Information, Cancellation and Additional Charges) Regulations 2013 (SI 2013/3134). We will be able to comment further on the requirements in relation to subscription models as the bill progresses through the Parliamentary process.

How can we help?

Please contact a member of the Commercial Contracts team if you would like any assistance in complying with the requirements of the Enforcement Notice.

This article was co-written by Arina Yazdi, Trainee Solicitor. 

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