Background
As discussed in the first alert in our series on subscription contracts, the Government has published draft secondary legislation and draft statutory guidance ahead of the implementation of the new subscription contract rules on 1 January 2027. In this alert, we explore the specific pre-contract information (“PCI”) that traders will be required to provide to consumers.
Pre-contract information
Under the new rules, before a consumer enters into a new subscription contract, the trader must provide the consumer with two layers of information: the ‘key PCI’ and the ‘full PCI’. Both must be provided in clear and plain language and presented in a way that makes the information easy for the consumer to understand.
(i) Key PCI
The key PCI must include information on:
- any auto-renewal terms that take effect if the consumer does not take action to end the contract;
- the duration of the contract and any initial minimum period before the consumer can end the contract;
- the terms of any concessionary periods (e.g., free trials or reduced-price periods), including when the consumer will be liable for the first payment or first full-price payment when the concessionary period ends;
- the frequency of payments and the minimum amount payable on each occasion, or how that will be calculated, together with the monthly equivalent where payments are not monthly;
- the minimum total liability of the subscription;
- any rights the trader has to change the amount or frequency of payments;
- information on how to end the contract, including relevant contact details and any notice period;
- when reminder notices will be sent; and
- a summary of the initial and any renewal cooling-off rights, including any circumstances in which the initial right may be lost, and confirmation that further details are contained in the full PCI.
The draft guidance clarifies that the key PCI listed above must be provided together as a single set of information, separate from the full PCI or other material. Although the key PCI can be displayed on the same screen as other important information, the guidance states that it should be provided first, prominently and separately from the full PCI and other information. In particular, it should be set apart from other information to ensure that it comes to the consumer’s attention. This could be achieved, for example, by using an appropriate font, size, colour, position or text box/border.
For online subscription contracts, the key PCI must be displayed in writing as close as possible to the point at which the consumer commits to the contract (e.g., when clicking a ‘pay now’ button), without the consumer having to take additional steps to access the information, such as clicking on a hyperlink.
(ii) Full PCI
The full PCI must include the key PCI set out above and additional information on:
- the main characteristics of the product/service;
- the trader’s identity and contact details;
- delivery charges and additional costs;
- the arrangements for payment and delivery;
- the arrangements and timeline for supply of the product/service;
- the trader’s complaints policy;
- detailed information on the consumer’s initial cooling-off right and any renewal cooling-off rights, including timing, exercise, possible loss of the right and refund consequences;
- a reminder of the consumer’s statutory rights and remedies if there is a problem with the product/service;
- information about after-sales customer assistance services or guarantees; and
- relevant codes of conduct, deposits or financial guarantees, digital-content functionality and compatibility, and available out-of-court complaint and redress mechanisms, where applicable.
The full PCI must also be given or made available together and as close as possible to the point at which the consumer commits to the contract. Unlike the key PCI, the full PCI for online subscription contracts may be provided through a clear and prominent hyperlink on the purchase webpage. It must then be confirmed on a durable medium before performance of the contract begins.
Much of this information will be familiar to businesses from the PCI requirements under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“CCR”). For subscription contracts covered by the Digital Markets, Competition and Consumers Act (“DMCCA”), the new subscription rules replace the CCR requirements on PCI and cooling-off cancellation rights.
However, the new rules place a clear focus on highlighting to consumers at the outset that, if they do not take action to end their contract, it will continue and they will have an ongoing obligation to pay. Businesses offering subscriptions with a free trial or discounted initial period will also need to make clear when the consumer will become liable for the first or higher charge and how much it will be.
In a further effort to increase price transparency, businesses are required to include in the key PCI the monthly equivalent of the payment amount for any subscription that is not paid for monthly, and to make clear to consumers the total minimum commitment under the contract, for example, if the customer is tied in for an initial minimum period.
Businesses must also consider the interplay with the drip pricing rules under the DMCCA and ensure that the “total price” is presented to the consumer during the purchase flow (see our previous alert here). This is another area under close scrutiny by the Competition and Markets Authority (“CMA”) (see here).
Consequences of non-compliance
Failure to provide the PCI can have significant consequences. Failure to provide the key PCI is a breach of an implied term and gives the consumer a statutory right to cancel the subscription contract. Depending on the circumstances, the consumer may also be entitled to a refund of payments for which they became liable from the relevant date specified in the Consumer Subscription Contracts (Cancellation and Information) Regulations, subject to the detailed refund rules.
In contrast, failure to provide the full PCI does not result in an automatic right to cancel, but can still expose the business to other claims depending on the information omitted. For example, if a trader fails to provide the consumer with information on their cooling-off right, the ordinary 14-day cooling-off period will be extended until 14 days after the trader corrects the breach, subject to a maximum extension of 12 months. The trader may also be unable to deduct or retain certain amounts for products or services supplied before cancellation, because several of the statutory deduction rules depend on compliance with the initial cooling-off information requirements.
Additionally, failure to provide either key or full PCI may lead to enforcement action by the CMA, which is currently very active. The CMA can open an investigation if it suspects a breach. If infringements are identified, the trader could face significant financial penalties of up to £300,000 or 10% of global turnover (whichever is higher).
What does this mean for businesses?
Putting the new PCI in place before 1 January 2027 will be a priority for businesses to ensure that new subscriptions entered into from that date are entered into on a compliant footing. Failure to give consumers the required key PCI may give them a statutory right to cancel the contract with immediate effect and, depending on the circumstances, obtain a refund under the detailed statutory refund rules.
Changes to PCI must therefore be treated as a substantive compliance requirement rather than a simple exercise in updating terms and conditions. Businesses should update their subscription processes to satisfy both the content and formatting requirements for PCI. Baker McKenzie supports businesses with compliance throughout the subscription lifecycle, including advising on how to ensure subscription contracts and PCI comply with the new rules.
For more information, please reach out to the Baker McKenzie Consumer Law Team.
