With predictable revenue streams, it is understandable why a subscription business is attractive. Recent years have seen the launch of various innovations, such as monthly recipe boxes, coffee pods or health products, with numerous digital apps adding to established subscription services such as magazines or a wine club.
Online trading platforms, such as Shopify or Kofi, make it easy to set up a new business and the subscription model has taken on new life, but there is a web of legal considerations that businesses need to comply with. That web is about to get tighter. New subscription rules under the Digital Markets, Competition and Consumers Act 2024 are due to apply to consumer subscriptions entered into on or after 1 January 2027.
Now is a good time to audit your terms and conditions to ensure that your business is compliant and protecting your consumers as it should. Acting now will help you get ready for the new rules before they take effect and put you one step ahead of your competitors.
Some of the key legal considerations where a subscription business needs to ensure compliance include:
Consumer rights
Consumer laws, such as the Consumer Rights Act 2015 and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, require terms and conditions to be available to the consumer for their agreement, and they need to set out all pertinent details such as pricing, rights to cancel, length of any subscription etc.
Advertising guidelines
Care needs to be taken when planning your promotional strategy, especially if you offer a free trial.
There has been a rise in misleading advertising campaigns which lure customers into starting a subscription with a free trial which often then leads straight into charges at the end of the trial period.
The Advertising Standards Authority has published guidance about this, but the key recommendations include ensuring there is clear and prominent wording next to the ‘buy’ or ‘start trial’ button so the consumer is absolutely clear on:
- cancellation rights associated with the free trial;
- what the paid subscription will look like if the trial is not cancelled; and
- other commitments and conditions associated with the subscription.
Auto-renewal rights
The subscription model relies on retention of customers, so it is no wonder that auto-renewals are a popular technique.
However, auto-renewals can mean consumers end up in what is known as a ‘subscription trap’ – a consumer may get busy and has forgotten to cancel a subscription they hardly used and, before they know it, another year’s charge has hit the credit card. From 1 January 2027, the new rules will require reminders and easy cancellation to prevent this. Even where no law has been breached, the customer will not be happy and this may have an impact on reputation and retention.
Pre-emptive action, such as reminding the consumer about the renewal date well in advance, or having an active opt-in for the consumer could address this growing source of consumer complaints.
‘In life’ contract amendments
You may wish to make changes to the terms and conditions during the life of the contract.
Some models offer the consumer the right to pause their subscription at any time, delaying the delivery of products for another month or so, as a consumer-friendly mechanism designed to maintain retention.
Alternatively, as the business owner, you may wish to make changes such as increasing prices or discontinuing certain products. This can be easier if the subscription life is shorter, for example monthly rather than yearly. However, it is important to seek legal advice about how this can be done in a transparent and legally compliant way.
Privacy and data protection
As well as compliance with the handling, storing, and processing of personal consumer data, businesses ought to consider how marketing will play out given the fluidity of the customer base. It can be a fine balance to ensure the lines of data privacy are not blurred, for example:
- If a consumer has unsubscribed to the products, did they continue to consent to receiving marketing messages so you can bring them back?
- When a consumer signs up, do they only consent to receiving messages in line with the provision of the subscription service itself?
- How does marketing work with a ‘paused’ customer?
New subscription rules from 1 January 2027
The Digital Markets, Competition and Consumers Act 2024 introduces a new regime for consumer subscriptions. Draft regulations were laid before Parliament in October 2026 and, subject to approval, the rules will apply to consumer subscriptions entered into on or after 1 January 2027. The main changes cover four areas:
- Pre-contract information – key information, such as the fact that the consumer will keep paying until they cancel, how often they will be charged and how much, must be shown clearly before sign-up and separately from your full terms.
- Reminder notices – businesses must send reminders before a free or discounted trial converts to a paid plan, and before renewals.
- Cooling-off – a new 14-day cooling-off period will apply after a trial converts to a paid plan and on certain renewals, with refunds generally due within 14 days.
- Cancellation – cancelling must be straightforward, and consumers who signed up online must be able to cancel online.
The regulations are still in draft, so some detail may change before 1 January 2027. The Competition and Markets Authority can now fine businesses directly for breaching consumer law, so it is worth reviewing your sign-up, renewal and cancellation process now. Our guide to the new subscription rules explains what you need to do before they take effect.
How we can help
Getting your subscription business set up correctly, or to keep it running properly, requires compliance across a span of legal issues.
We have a strong team of experts in our commercial team who provide comprehensive advice to help you navigate an area of law that is coming under more and more scrutiny.
For an informal discussion with a commercial solicitor, please book a free 15-minutes consultation with JPP Law.
