Subscriptions wrapped – consumer contracts come under scrutiny throughout 2024

In 2024, subscription contracts have attracted significant scrutiny on both sides of the Atlantic, especially in digital markets. As 2024 draws to a close, we have summarised the key developments and what to expect in 2025: here’s your 2024 “subscriptions wrapped” …

US Federal Trade Commission

The FTC has historically taken an active role enforcing against misleading conduct in subscriptions. For example, 2023 saw the FTC sue Amazon for the alleged use of dark patterns used to retain Prime customers including auto-enrolling practices and making it difficult for customers to cancel their Prime subscriptions, which the FTC considered violated Section 5 of the FTC Act and Restore Online Shoppers’ Confidence Act (ROSCA). The FTC also sued Adobe and Care.com for their subscription practices and is now reportedly probing Uber in relation to its cancellation policy for its Uber One services – a monthly or annual subscription which allows subscribers to access savings on Uber and Uber Eats. 

Although federal and state laws on subscriptions are not new, they have changed significantly under the Biden administration. October saw the release of the FTC’s updated ‘click to cancel’ rule, which maintains that it should be as easy to cancel a subscription contract as it was to sign up to one. The ‘click to cancel’ rule on negative option marketing will take effect in early 2025, and among other requirements, will prohibit sellers from misrepresenting any material facts, require sellers to provide important information before obtaining billing information and charging consumers, and will require sellers to obtain informed consent about the subscription features before charging consumers. 

However, the fate of these initiatives under the new administration remains to be seen, where the Republican Commissioners have been critical of enforcement and rulemaking that extends the bounds of traditional consumer protection standards.

UK Competition and Markets Authority

In the UK, 2024 saw the Digital Markets Competition and Consumers Act (DMCC Act) pass Parliament, with prescriptive rules on subscription contracts. The CMA has published a consultation on its draft guidance for the subscription contracts which considers more specific provisions around cooling-off cancellation rights, cancellation remedies for consumers, repayment of refunds, contractual terms for exiting a contract, arrangements for exiting a contract, information notices, and pre-contract information, which businesses will have to adhere to once the relevant provisions of the DMCC Act have taken effect.

Whilst the CMA’s direct enforcement powers are not expected to come into force until Spring 2026, businesses are incentivised to ensue compliance expediently, not least because the CMA’s draft guidance indicates that pre-commencement conduct could be factored into penalty calculations for businesses which are found to have infringed consumer protection law. The CMA is expected to clarify its approach to penalties before the DMCC Act comes into force.

European Commission

The EC considered subscriptions as part of its recent ‘Digital Fairness Fitness Check’ to evaluate whether EU consumer protection laws are fit for purpose in the digital markets. The EC highlighted the need for conversations between various regulators for consumer protection, data protection and digital regulation. 

Whilst there are no specific EU-specific provisions on subscriptions, subscription contracts are subject to more general EU law on consumer contracts which provides for a 14-day right of withdrawal from online contracts and some EU Member States have introduced specific rules around subscription contracts. 

For example in Germany and France, legislation requires a clear and easily accessible cancellation function/button with two or three clicks respectively. There are also rules in inter alia Belgium, Italy and France which stipulate requirements on the timing and form of renewal information disclosures to customers.

What to expect in 2025?

Authorities across the globe are considering how best to expand on existing consumer protection enforcement to use ex ante regulations, especially in the digital markets. Subscription contracts are no exception. 

As businesses welcome the new year, they also see an increase in risk exposure, notably in the UK where the consequences of non-compliance are set to jump to penalties of up to 10% global turnover. Whilst common themes emerge, businesses need to navigate a multiplicity of specific rules on disclosures and consumer notices as new rules begin to bite.