In the Spring Budget announced last Wednesday, Chancellor Philip Hammond declared that the Government would be introducing new measures to strengthen consumer rights, focussing on “unexpected fees or unfair clauses, [simplifying] terms and conditions, and [giving] consumer bodies greater enforcement powers”. Further detail will be set out in a green paper.
What is the Government proposing?
The protection of consumers against unscrupulous business practices has been at the forefront of the Government agenda in recent years, typified by the introduction of the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations in 2013 and the consolidation of consumer legislation in the Consumer Rights Act 2015. This latest Budget announcement seeks to protect consumers further.
In its complementary press release, the Government pledged to “investigate ways to protect consumers from unnecessary costs and inefficiencies, including:
- preventing consumers being charged unexpectedly when a subscription is renewed or a free trial ends;
- making terms & conditions simpler and clearer including in digital contracts, like when you sign up to a social network; and
- fining companies that mislead or mistreat consumers.”
There has been a lot of focus in recent years on how T&Cs in consumer contracts could be simplified and clarified.
In particular, BIS consulted on consumer terms and conditions in 2016, including the following proposals:
- Key terms to be presented bold and up front, rather than hidden in lengthy, legalistic documents
- Encouraging businesses to compete through consumer-friendly T&Cs
- Tracking changes in T&Cs whenever they change
The BIS consultation also mooted the possibility of fines for breaches of consumer legislation. Although no specific amounts were proposed in the consultation, BIS referred to the ability of a Dutch authority to impose fines of up to EUR 450,000, and the Italian Competition Authority to impose fines ranging from EUR 5,000 up to EUR 5,000,000. If similar fines apply in the future in the UK, consumer law compliance will be more of a priority for many retailers.
Another area of focus is ‘subscriber traps’. A subscriber trap, according to Citizens Advice, is “where a consumer is misled into signing up to a subscription to goods or services”. This may involve a consumer signing up to a free trial for a limited period, unaware of small print which permits the retailer to subsequently charge the consumer ongoing amounts following the expiration of the free trial. Often it is difficult for the consumer to cancel their subscription – Citizens Advice estimates that 2 million people in the UK have had problems cancelling subscriptions.
The BIS consultation also referred to subscriber traps, using an example of where the consumer is unaware of all the T&Cs, the need to cancel at the end of the free trial period and the fact that fees will apply after the free trial period ends.
However, the BIS consultation did not specifically propose new rules with respect to subscription models. Subscriber traps fall foul of existing consumer legislation, particularly in relation to unfair terms, so it will be interesting to see what additional rules the Government proposes in its green paper. These could include requiring retailers to:
- remind the subscriber in advance of a free trial ending;
- give consumers the option to sign up to a free trial which does not auto-renew;
- make it easier for consumers to cancel;
- notify consumers whenever a payment is taken.
Any changes affecting subscription models (even those which don’t constitute “traps”) could have an impact on many retailers’ business, whether they offer goods (such as Birchbox beauty boxes) or ongoing services (such as Amazon Prime’s delivery and other services).
It has not been confirmed whether the eventual outcome of the Government’s proposals will take the form of new or amended legislation, or perhaps just revised guidance in relation to the existing legislation. It is also not clear whether the green paper will pick up on where the BIS consultation left off.
For the time being, retailers will need to await the publication of the Government’s green paper. However, in the future it is likely that retailers will need to do more to communicate their T&Cs clearly and simply to consumers and comply with consumer legislation (including in relation to subscription models), or risk possible fines.