New rules for subscription contracts: is your business ready?

Subscription models are an increasingly prevalent trading model, offering businesses a stable, predictable revenue stream and longer, higher value customer lifecycle compared to transactional models. Whether it’s curated kits, consumables or streaming, consumers are drawn to the convenience, ease, and cost predictability and savings (for example, of shared access models compared to traditional ownership).

As part of the consumer law reforms introduced by the Digital Markets, Competition and Consumers Act 2024 (DMCC), subscription models will become more tightly regulated. The new rules are designed to combat ‘subscription traps’, improve transparency and make it easier for consumers to manage their subscriptions. The reforms are expected to come into force in Spring 2026 and businesses will need to review, and potentially overhaul, their subscription sign up and renewal processes and digital interfaces to comply.

What is a ‘subscription contract’?

Under the DMCC, a subscription contract is a contract between a business and a consumer which involves:

• Automatic, recurring periodic or continuous payment for goods, services or digital content;
• Auto-renewal provisions and processes, which mean the consumer must take steps to end the contract; and
• Potentially, an introductory offer (e.g. free trial or a discounted period), after which the contract continues at full price unless the consumer takes action to cancel.

Certain types of renewing contracts which would otherwise fall within the definition of subscription contracts (e.g. utilities and insurance) are excluded.

New compliance requirements

The new requirements for subscription contracts include:

• Pre-contract information: Prescribed terms must be set out clearly, in one place (i.e. not embedded within lengthy terms and conditions) and presented to the consumer before they subscribe. In particular, it must be made clear that the contract will auto-renew at the end of the given term, as well as any minimum contract period, how they can cancel and when reminder notices will be given.
• Reminder notices: Written notices that a contract is due to renew must be provided in durable media and include certain key information to enable the consumer to cancel. These must be sent: before the end of any introductory offer period, at 6 monthly intervals after the full price contract began, and twice before any renewal that is 12 months or more from the last payment. Reminders may be incorporated in marketing communications, provided the notice is more prominent than the marketing content.
• Straightforward exit: Consumers must be able to cancel easily (and via the same method originally used to subscribe) without unnecessary steps and businesses must acknowledge receipt of a cancellation notice. The process must not involve multiple, complex steps. So-called ‘dark patterns’, which prompt the consumer repeatedly to confirm their decision (e.g. “Are you sure?”, “Lose your benefits now?”), are unlikely to comply.
• Cooling-off periods: Consumers will benefit from 14-day cancellation right when they initially enter into the contract and the contract auto-renews at the end of an introductory period and where a renewal is for a period of 12 months or more.

These replace and extend current pre-contract information requirements under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

Breach and enforcement

Non-compliance carries significant consequences for businesses. The DMCC conferred new powers on the Competition and Markets Authority (CMA), enabling it to enforce the new rules through administrative proceedings (i.e. without going through the courts), including issuing compliance directions (e.g. mandating compensation to customers) and/or significant fines (up to the higher of £300,000 or 10% of the trader’s global turnover). In addition, non-compliant contracts may be deemed unenforceable and void.

Although the subscription rules will not enter into force until Spring 2026, and secondary legislation and further guidance are awaited, businesses are encouraged to begin their compliance reviews now to ensure there is sufficient time to make necessary changes. Additionally, the CMA has indicated that pre-commencement conduct may be taken into account when determining penalties.

Practical steps to compliance

To begin your business’ compliance journey:

• Assess your current sales models and terms to establish which of your business offerings fall within the scope of the new rules.
• Review subscription management processes and customer journeys to ensure these include suitable mechanisms and consumer notices that satisfy the requirements for pre-contract information, cooling-off periods, renewal reminders and cancellation processes (including refunds).
• For current contracts, implement systems to issue reminder notice at the prescribed points in the contract lifecycle. Update customers of any other changes to your terms as a result of your compliance activities.
• Stay informed. Secondary legislation and further CMA guidance is expected and will inform the application of the new rules.
• Consider the impact of the wider consumer law reform under the DMCC, including in relation to fake reviews and drip pricing, which are already in force.

Do you need legal advice?

If you have any questions on the new rules on subscriptions, drip pricing, fake reviews or how another aspect of the DMCC may impact your business, please get in touch with our Commercial and Technology lawyers at [email protected]. ​​​​​​