US & UK: Evolving regulations on consumer subscription contracts

Stronger consumer protections demand compliance or face penalties

Why should I read this?

Subscription contracts, common in digital markets, have faced criticism as many consumers forget to cancel their free trials and end up paying for unwanted subscriptions. To address this, the US already has significant federal and state laws in place and is planning more measures. Meanwhile, the UK is progressing legislative changes to implement similar protections.

Although both jurisdictions are making significant efforts to shield consumers from the downsides of subscription contracts, their approaches differ markedly. Businesses operating in both regions must adapt to these stricter regulations to avoid substantial fines.

What are the key differences between the US and UK approaches to subscription contracts?

The US takes a proactive regulatory approach, offering immediate and layered consumer protections. In contrast, the UK is pursuing comprehensive reform, with rules still under consultation. While the US model provides quicker relief through stricter laws, the UK's broader strategy, though slower to implement, aims for more consistent long-term protection across all types of subscriptions, not only those in digital markets. The UK's high penalties, including potential infringement decisions by the Competition and Markets Authority and fines of up to 10% of global turnover for breaches, show its commitment to ensuring these rules are taken seriously.

The US leads with rules at both federal and state levels. While these rules differ in some requirements, they establish industry-specific and general guidelines for automatic contract renewals. A recent example is the Federal Trade Commission’s ‘click to cancel rule’, which is expected to take effect by April this year. This will depend on court rulings and the new administration's decision to proceed with it. It will be widely applicable, ensuring a baseline of consumer protection. States like California add extra layers of protection with specific rules, such as the Automatic Renewal Law, which, among other things, requires a clear ‘click to cancel’ option with any discount offer. This creates a complex regulatory environment for businesses to navigate.

The UK recently consulted on new consumer protection measures for subscription contracts under the wider consumer law reforms of the Digital Markets, Competition and Consumers Act 2024 (Act), set to take effect in Spring 2026. Among other things, these measures will require businesses to set out clear information before consumers subscribe, notify them before the first renewal payment, provide additional cancellation rights, and make it easy to cancel. International businesses offering subscriptions in the UK will need to comply with the Act’s rules.

Both approaches highlight a growing recognition of the need to protect consumers from exploitative practices in the digital marketplace. Each has its merits, and it will be interesting to see how they evolve and influence each other in the coming years.

What should I do?

As the regulatory landscapes in the US and UK evolve, businesses must stay proactive to ensure compliance. This includes updating subscription policies, simplifying cancellation processes, obtaining clear consumer consent, and reviewing automatic renewal practices to comply with applicable laws. Some of these changes will take time and will incur additional costs that need to be managed by impacted businesses. Keeping an eye on guidelines issued by regulatory bodies will help businesses understand what to expect. Globally, businesses should anticipate similar trends and prepare to adapt.

Co-authored by Clare Johnston (Knowledge).