On 20 June 2021 the Government finally published its consumer paper for consultation. It is titled Reforming Competition and Consumer Policy. The closing date for responses is 11.45am on 1 October 2021.
The document is 147 pages long! So I am producing a summary/opinion piece on areas of the consultation.
See ADR: A Government consultation for details about my responses to the Alternative Dispute Resolution section of the consultation and Reviews: A Government Consultation for the section on fake reviews,
An edited summary of “Chapter 2 Consumer Rights” pages 83 – 91 from the consultation policy is below:
“Maintaining strong consumer rights and business competitiveness”
The Government is looking to put consumers and competition at the heart of the economy. The Consumer Rights Act 2015 consolidated and updated consumer law which now includes digital content. Markets are constantly changing and adapting with an increase in online transactions accelerated due to the pandemic. The policy considers opportunities to strengthen and update consumer rights whilst balancing this with proportionate requirements for businesses, who need to continue developing innovative products and services. The increased online collection and use of consumer data has enabled companies to develop both personalised offers to individual consumers and a sophisticated understanding of wider patterns and trends in consumer behaviour.
The Government consultation document says “While these practices can benefit consumers, for example resulting in tailored advertising or an improved online shopping experience, studies show that more than 1 in 10 websites today are using insights into consumer behaviour to influence choice. This can be as simple as exploiting a consumer’s over-confidence that they will remember to cancel a subscription, preselecting certain options to influence consumer behaviour, or commissioning reviews for a product.”
“Vulnerable consumers are particularly sensitive to these potential harmful practices. Strategies such as “One-click” purchasing and subscriptions, where users agree to a monthly or other regular payment have been identified as problematic for consumers trying to regulate their spending.”
“Government has identified particular concerns relating to subscription contracts, the commissioning of fake or misleading reviews and the exploitation of behavioural biases.”
“Modernising consumer rights and subscription contracts.”
“The use of subscription contracts has accelerated across sectors due partly to the digitisation of markets and a desire amongst consumers for greater choice and convenience. The creation of apps and mobile commerce has helped drive the push. Flexibility and ease of signing up has been allowed through mobile commerce.”
Subscriptions have become an increasingly important part of online business models, they drive readership and revenues, and contribute to the sustainability of a sector. Also, as the Government notes, “Consumers switching between products based on initial experiences can also boost competition between businesses and create incentives to lower prices or improve the quality of the services provided.”
“The use of subscription models by business is not always purely beneficial for consumers.” The problems with the “Loyalty penalty” have been well documented and spoken about. For example in this article FCA stops insurance companies’ loyalty penalty, so things are changing for the insurance sector. However, automatic renewal, roll over and lock-ins still remain for other sectors. Contracts which are misleading and free trials trapping consumers have frequently caused problems for many consumers. See, for example, How to challenge terms & conditions (even those agreed)
The Government consultation document continues: “Addressing the problems identified by regulators, Citizens Advice, and other stakeholders, Government proposes taking action in three areas. (i) At the pre-contract stage, where important information about the subscription contract should be clear and prominent; (ii) contracts which continue and contain autorenewal features, should not auto-renew or rollover without the consumer’s specific agreement and (iii) the process of exiting a contract should be clear and easy for consumers.”
“Figure 8: What is a Subscription contract?
The term “subscription” is used in this consultation to mean a contract between a consumer and trader over a period of time for the supply of goods (magazines, beauty products, food boxes) a service (gym membership, online dating site membership, web hosting) or digital content (digital music, eBooks, computer games).”
“Giving consumers a clear choice on what they are signing up for”
Government wants to strengthen the law and make more explicit the need for certain information and choices to be provided, in a clear and prominent manner and just before the consumer enters into a subscription contract. “Consumers should know up front the key terms and features of a subscription contract that they are signing up to.”
It wants to clarify the following:
1) “The requirement on traders to make the consumer aware, in a clear and prominent manner, of the subscription information at an early stage in the process and immediately before the consumer places their order;”
2) that their order or agreement is for a subscription contract and specific information on explaining or indicating the minimum contract terms and price per billing period;
3) whether contracts will auto-renew or auto-extend at the end of the contract term; and any minimum notice period for cancellation;
4) expressly require any trader offering any subscription contract to consumers, that would contain terms on auto-renewal or rollover, that they offer the consumer the choice, at the pre-contract stage, to take the subscription without auto-renewal or rollover, i.e., for a fixed initial commitment period only. “The consumer must actively choose to take the contract with autorenewal or rollover (i.e., the consumer must not be required to, for example, to de-select a preticked box in order to take the contract without auto-renewal or rollover).”
“Nudging consumers so they are aware of ongoing subscriptions”
“Research from the European Commission showed around two thirds of customers who bought a subscription through an online advert had not seen the length of the subscription in the fine print.” Even people who are aware of the terms and overlook precise times can continue to pay for services they don’t want. Government is looking to strengthen the law with a change to “expressly require traders” to remind consumers before the end of any commitment period that the contract will auto-renew unless it is cancelled.
“Free trials and introductory offers are a helpful means of attracting new customers and allow individuals the chance to test a product or service before committing to a full price purchase.” However, they can fall into a subscription trap. Government is looking to strengthen the law by “expressly requiring traders to issue a reminder to consumers that a free trial or low-cost introductory offers coming to an end, the terms of the autorenewal, and details for how to cancel if they so wish; or as an alternative • requiring traders to obtain the consent of the consumer before extending the contract to a full price term.” Inactive subscriptions can go unnoticed over a long period of time for a variety of reasons. Government is seeking views on whether traders “should be required after a reasonably long period of time where there is evidence of inactivity (for example through electronic records or streaming activity) to give notice of suspension of service and to stop charging money for the consumption or use of goods, services, and digital content under a subscription contract.”
“Current consumer law rules also prohibit unfair commercial practices, including aggressive commercial practices which cause or are likely to cause the average consumer to take a different decision.” But people are finding it hard to cancel subscriptions. Government is looking to make it easier for consumers to cancel in a straightforward, cost-effective, and timely way.
Government’s “intention is that the rules proposed above would apply to subscription contracts for goods, services, and digital content in general across the economy but certain types of contracts and/or sectors would be exempt from the rules. The policy aims to minimise consumer harm and detriment. Government proposes to exclude any contracts for goods, services, and digital content from the proposals, where an interruption in supply could result in serious harm to consumer welfare in principle. For example, it anticipates that this would involve excluding contracts for the supply of medicines or contracts for certain financial services such as insurance.”
Helen Dewdney The Complaining Cow responses to the consultation Download