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The Digital Markets, Competition and Consumers (DMCC) Act: What it means for software and digital content providers

Posted on 12 June 2024

The first major overhaul of UK consumer legislation for almost a decade, the Act is especially significant for businesses offering digital content or software (whether via the cloud or as downloads) to consumers on a subscription basis, as it aims to address 'subscription traps' considered to be detrimental to consumers. Even if the relevant business-to-consumer contract's governing law is stipulated as foreign, the new subscription rules will apply if it has a "close connection" with the UK.

The below highlights what consumer-targeting businesses providing subscription-based software or digital content need to know in order to prepare.

What are the new information requirements?

Under the Act, consumers must be provided with the following information:

  • Key pre-contract information. This includes information about the relevant autorenewal mechanism, any new or increased charges that apply after a trial or discounted period of use, how often payments must be made, and how the consumer can terminate the relevant subscription. If payments are not made monthly, the consumer must be informed what the monthly amount would be as though payment were monthly. A summary of the consumer's cooling-off rights (see below) is also required.
  • Full pre-contract information. This includes key pre-contract information mentioned above, as well as further details regarding the business's identity (including contact details), the time by which the relevant software or digital content will be provided and information regarding its functionality (such as any applicable region coding), the business's complaints handling policy, and the consequences of the consumer exercising their right to cancel during the initial cooling-off period or any renewal cooling-off period (see below). A summary of the consumer's statutory rights must additionally be given.

The key pre-contract information and the full pre-contract information have to be provided separately to avoid confusion. The information must be easily accessible and not hidden behind multiple links or buried in hard-to-find webpages. In practice, where a consumer purchases the subscription online, this would be implemented as part of the checkout process. A final step in this process is also required where the consumer explicitly acknowledges that they will be making a payment under the contract.

The Act additionally prescribes the following:

  • Autorenewal reminder notices. If, as is common in the provision of software, the subscription begins with a free or discounted period, a reminder notice must be sent to the consumer before the first payment at the full price is due. For subscriptions renewing at intervals of no more than six months apart, a reminder notice must be given in respect of the last renewal payment due before the expiry of each six-month period. Subscriptions that renew less often (for example, on an annual basis) necessitate a reminder to the consumer before each renewal payment is due.
  • Cooling-off notices. These must be sent (separately from any other information) on the first day of each renewal cooling-off period (see below) or as soon as possible after that. They must clarify that the subscription is ongoing, state the start and end dates of the relevant renewal cooling-off period, remind the consumer of their cancellation right and how to exercise it, and explain what happens if that right is exercised or lost. 
  • End-of-contract notices. Where a consumer exercises their right to cancel a subscription (for example, during one of the cooling-off periods discussed below) or otherwise end it, they must be given a notice acknowledging termination and the end date. If the consumer cancels online, this must given within 24 hours. The timeframe is extended to three working days if the consumer's notification is given via another method.

What new cancellation rights are consumers entitled to under these subscription contracts?

Many consumer-facing businesses are already familiar with the concept of a cooling-off period (during which consumers can cancel the relevant contract for any reason) under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013. The DMCC Act is more onerous, as it introduces a 14-day cooling-off period not just at the start of any in-scope contract (which, unlike under the 2013 regulations, do not apply solely to distance selling), but also at the start of any renewal period.

Consumers must be able to cancel or end subscriptions in a straightforward way that does not involve any unnecessary steps. Processes to enable this should be streamlined and clarified (for example, by clearly signposting consumers to an account or subscription management page that includes a cancellation button). Consumers cannot be forced, however, to adopt a particular method of termination. The Act stipulates they can give notification of their intention to end a subscription simply by "making a clear statement". As such, a clear email to the business's sales team would suffice.

The Act is silent about the implications of using or benefiting from the relevant product before a cooling-off period expires. This is obviously a concern for businesses as regards any refund obligations if a consumer cancels during a cooling-off period. When the Act's provisions were scrutinised at the House of Lords, it was confirmed that secondary legislation will be enacted to address this. A position similar that under the 2013 regulations, whereby the cancellation right is lost if the consumer decides to start use before the end of a cooling period, may be adopted.

When do these requirements take effect?

Most of the Act's provisions will not become effective until secondary legislation is made. This, of course, will not happen until after the general election. The current Government had previously indicated that the above requirements may not take effect before 2026.

Even if the outcome of the election is a change in Government, the supportive cross-party response to the Act's provisions in Parliament indicates that further changes or reversals are unlikely.

Why does this matter?

While historically the CMA has been relatively toothless in the face of non-compliance with UK consumer law, it will, under the Act, be afforded much stronger enforcement powers. Not only will it be able to issue GDPR-style financial penalties (up to the higher of 10% of the contravening business's global annual turnover or £300,000) without having to go to court first, but it will also be able to order compliance measures. Contraventions of the Act, therefore, are likely to work their way up businesses' risk agendas.

What proactive steps should your business take now?

Clearly, the overhaul of legal requirements concerning what information must be provided to consumers, how it must be presented, and when it must be communicated creates a daunting administrative challenge. Businesses that start planning now, however, will be well placed among industry competitors by the time the relevant provisions become effective. We would recommend getting ahead as soon as possible by undertaking the following:

  • Review and update existing business-to-consumer terms. Consumer-directed sales terms for subscription-based purchases will require updating to take into account new consumer rights, such as the right to cancel during a renewal (and not just an initial) cooling-off period.
  • Optimise the consumer checkout and subscription management processes. Any unnecessary or unreasonable steps should be axed and all purchase and cancellation processes should be simplified, streamlined, and made as transparent as possible.  
  • Train the sales team. Sales teams will need to be well-informed about the new requirements and trained to facilitate compliance, particularly in providing pre-contract information and processing cancellations.
  • Prepare notice wording and consider automation. The various notices that need to be sent to consumers at specific intervals could become administratively burdensome. It is worthwhile considering industry-specific solutions to assist with managing this.
  • Stay informed. As much of the Act contemplates secondary legislation, businesses should keep up to date and, as far as possible, factor in sufficient flexibility to adapt readily to a changing regulatory landscape.  
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