The Digital Markets, Competition and Consumers Act which was given Royal Assent on 24 May 2024 has introduced some substantial new changes aimed at further strengthening consumer protection rights.
If the Act applies to your business system then you may need to consider whether you need to make changes to your website (both its structure and content), changes to your standard terms and conditions which your franchisees use, changes to your processes and certainly additional training for your staff and your franchisees.
So what’s changed? Well let’s start with the basics.
A subscription contract is a contract between a business and a consumer which is not an excluded contract and which:
- is either for a period of indefinite length (i.e. no definitive end but continues until a customer terminates) or fixed length term that automatically recurs or continues and in each case where the customer continues to incur a fee until such time as the customer cancels the contract; and/or
- the contract contains a free trial or a reduced introductory price period after the end of which the customer will become liable to pay or pay a higher rate unless the customer cancels before the free or reduced price period has expired.
Excluded contracts are contracts listed in Schedule 22 to the Act and include contracts for the supply of electricity, gas, heating, water, banking services, package holidays and childcare. It is important that you check whether or not the goods or service you provide are excluded.
If your contract is not an excluded contract, then the following may apply to you.
Pre-Contract Information
This is now split into full and key pre-contract information. Note that key pre-contract information must be provided separately from full pre-contract information. Where the contract is entered into online, key pre-contract information must be provided on the page where the customer is entering into the contract in such a way that a consumer is not required to navigate away from that page. Finally, just before the customer signs up there must be a way for the customer to acknowledge that the contract will impose an obligation on the customer to make payments. If this step is missed then the contract will not be binding on the customer!
Reminder Notices
Depending on the structure of the subscription contract and the notice period that the customer must give to cancel, businesses will now be required to send reminder notices to customers. A reminder notice will need to contain specific information set out in the Act and must be given in a specific timeframe. In some circumstances additional notices may be required.
Terminating the Contract
Terminating the contract must be “as easy as entering into it”. You will therefore need to review your processes to ensure that customers can indeed bring their subscription contract to an end without unnecessary barriers.
One new requirement to note is that businesses will now be required to acknowledge a customer’s termination notice by issuing an end of contract notice. The end of contract notice must confirm the date on which the contract has ended or will end and provide a refund of any overpayment received from the customer.
Cooling-Off Periods
Cooling Off period have also changed. In addition to the usual cooling off period, i.e. the consumer’s right to terminate a contract within 14 days of entering into it, customers will now also have additional cooling off periods of 14 days once any promotional period has ended and/or upon renewal if the renewal term is for a period of 12 months or longer. Note that there is a requirement for the businesses to send cooling off notices at the beginning of each cooling off period.
If a business fails to comply with the requirement to provide pre-contract information, reminder notices, end of contract notices or provide a mechanism for customers to cancel contracts in a way required by the legislation, then the customer has the right to cancel the contract without notice or penalty.
In addition, the business can be fined and a customer may also be awarded damages or compensation.
Although we are still expecting further government guidance on the Act and secondary legislation to give the Competition and Markets Authority the power to issue fines and make decisions in case of alleged consumer law breaches, it is best to be prepared. Given that some of the changes will require significant time and investment, franchisors should put this on their agenda now to assess the impact of the changes on their and their franchisees’ businesses and to ensure that they allocate budget and time to making any changes and implementing them into practice.
This articles comes courtesy of Natalia Shvarts, Franchise Law Partner at Excello Law.
