The Digital Fairness Act is coming soon: With the public consultation for the Digital Fairness Act just around the corner (likely to start in the coming weeks), a final legislative proposal for a Digital Fairness Act expected by the end of 2026 and first details of potential focus areas of the European Commission (EC) coming to light, stakeholders are well-advised to stay on top of the discussion. Our existing six blogs [1] on specific topics of the Digital Fitness Check are certainly a great place to start! This time, we take a closer look at contract cancellations and digital subscriptions, topics which will very likely be addressed by the upcoming Digital Fitness Act.
- What are the main results of the Digital Fitness Check?
In the digital age, it is now easier and more convenient than ever to enter into new (digital) contracts: The Digital Fitness Check identified exponential growth in the digital subscription economy with 51% of participants in the conducted consumer survey indicating that they had purchased, used, renewed, or cancelled a digital subscription in the preceding year. 33% of participants also indicated that they had activated a free trial subscription in this period.
This growing importance of digital contracting has also raised awareness for potential problems: This includes concerns that contract terminations may be difficult in some cases, that “free trials” may (unexpectedly) turn into paid subscriptions and that forgotten subscriptions may automatically renew themselves. Given these concerns and the rising relevance of subscription contracts in the digital space, the EC – based on surveys – assessed the following areas in the Digital Fitness Check:
- Difficulties with online cancellations: 69% of consumers reportedly found it technically difficult to cancel their subscription contracts, with 55% experiencing mechanisms which they considered to be employed by traders to deliberately avoid cancellations. 34% stated having only been able to cancel their subscription after a long period of time, despite being charged monthly. Referencing another survey conducted in 2023, the report outlines that 40% of the participating consumers stated that the design of the respective website / app made the cancellation process very difficult. The percentage of consumers indicating that they had not received a confirmation of termination amounted to 54%.
- Automatic contract renewals: In the public consultation, 62% of consumers experienced automatic renewals of inactive subscriptions without receiving any preceding reminders. 44% reported unintendedly paying for additional months following the expiration of the initial contract period since they were unaware of the automatic renewal of their subscription. Another issue involving such renewals that was flagged are heavily discounted initial promotional prices, followed by significant price increases (“loyalty traps”). 40% of consumers stated having experienced unexpected price increases after the end of the initial promotional period due to unclear information on the price development provided by the trader.
- Free trials: The practice of free trials automatically converting into paid subscriptions which only requires passive consent by the consumer was also identified as problematic, in cases in which the trader did not indicate the auto-renewing nature of the subscription as part of the pre-contractual information. 29% of consumers reported often having their free trial automatically convert into a paid subscription without them being aware that this would happen. Additionally, 90% stated that they had been asked to provide payment information up-front when signing up for free trials.
- 14-day withdrawal right: Furthermore, the EC identified transparency issues regarding the right of withdrawal as set out in the Consumer Rights Directive (CRD) as well as complicated withdrawal procedures. The Digital Fitness Check states that only 54% of traders provided consumers with the required pre-contractual information, and that such information was, even when it was provided, regularly disclosed in an unclear manner. Additionally, 44% of consumers found it difficult to notify the trader of their intent to withdraw, with 29% reporting that they were not able to contact the trader at all.
- Overcharging: According to the EC, 30% of the consultation’s participants had experienced traders charging them for the entire month instead of just the amount due for the time they used the subscription following their withdrawal.
As we have already outlined in an earlier blogpost, these statistics should be taken with a grain of salt as they are mainly founded on opinion-based data of limited quality. Moreover, the mere finding that some consumers consider a process “difficult” does not by itself indicate that there is an underlying (legal) problem. At least some of the difficulties described may – instead – be more connected with necessary tech literacy and experience in the digital world. Therefore, the results rather provide an indication of areas where “legislative finetuning” may be helpful than a robust evidence base to take specific action.
II. The existing legal framework
The Report concludes that, while existing EU consumer law covers some of the practices outlined above, it does not provide streamlined regulation regarding all of these issues.
- Contract Cancellations
This may, for instance, lead to regulatory gaps and inconsistencies for contract cancellations: While the CRD requires traders to provide a prominent and easily legible withdrawal function (e.g. button), such requirement does not exist for cancellations other than those based on the 14-day withdrawal right.
The Unfair Commercial Practices Directive’s (UCPD) prohibits the implementation of non-contractual barriers to contract termination. To clarify the threshold of when a practice qualifies as a non-contractual barrier, the Commission’s Guidance on the UCPD states that it should be as easy to unsubscribe / cancel as it is to subscribe. However, it remains unclear what requirements traders have to meet to adhere to this abstract principle.
Similarly, the prohibition of dark patterns contained in the Digital Services Act also falls short on providing concrete guidance on how traders must design the cancellation process. Instead, it only outlines inadmissible practices. The same applies to Art. 16e CRD which allows Member States to adopt specific measures against dark patterns used to discourage consumers from terminating financial services contracts.
Regarding the group of gatekeepers, the Digital Markets Act prohibits the practice of imposing unfair conditions for terminating the provision of a core platform service. It also prohibits forcing users to subscribe to one service to access another. Additionally, gatekeepers cannot require users to use their identification, payment services, or web browser engine, nor can they restrict users from switching between or subscribing to different apps and services linked to their platform.
2. Transparency and key contractual components
In contrast to the scattered rules on cancellations, the issue of lacking transparency about key contractual components is regulated in a more streamlined manner. Under current EU law – including in the CRD, the UCPD, and the Unfair Contract Terms Directive – traders are for example obliged to inform consumers about the (total) price (including the total costs per billing period), their payment obligation and the subscriptions duration and renewal conditions. Other areas
Despite the already quite dense regulation of EU consumer protection law, further issues are not – at least not specifically or comprehensively – addressed by EU law. This concerns, in particular, practices like automatic renewals, renewal reminders, price hikes, switching from free trials to paid subscriptions, and requiring payment information upfront to sign up for a free trial.
The absence of EU law addressing these issues specifically and comprehensively does not mean that consumers are not protected from such measures: If contained in general terms and conditions, such provisions will be subject to (often times very strict) review by civil courts. The UCP provisions against aggressive or misleading commercial practices may also prevent some of the more problematic behaviors. Therefore, there is certainly an argument to be made that the existing provisions – if applied correctly – may offer sufficient protection.
However, it is possible that more specific regulation in certain areas may add to clearer standards and a harmonized approach throughout the EU, but it will also lead to more granular, fragmented rules for very specific practices. In light of the existing rules and the EU’s intense activity in regulating digital business models, the upsides of additional guidance through detailed legislation should be carefully weighed against potential pitfalls of overly-specific regulations. Moreover, it may be advisable to distinguish between different types of contracts, even if they are all concluded using digital means: A contract for the (repeated) delivery of physical goods may, for instance, not be as easy forgotten as the subscription for a digital service which might warrant different treatment in certain respect.
3. Country-specific regulation
In any event, however, regulation of these topics on a Member State level may lead to additional difficulties: Absent specific EU regulation, national contract law applies, potentially resulting in a fragmentation of legal requirements and obligations throughout the Member States. Some Member States (such as Germany and France) have implemented regulations requiring traders to establish a clear contract cancellation process in few, closely defined steps (the Digital Fitness Check report mentions “two” and “three” clicks, respectively). Various Member States – such as France, Germany, Italy, and others – also implemented specific rules for traders to obtain the consumer’s consent to an auto-renewal of subscriptions and oblige them to send renewal notifications. Such fragmentation on Member State level is not helpful and is neither in the interest of consumers (because they have different levels of protection in different countries) nor traders (because applying different processes and standards in different EU countries is inefficient and sometimes unfeasible for digital offers). These areas may therefore warrant the implementation of unified standards on the EU level.
III. Taking Action: Potential countermeasures
In the Digital Fitness Check, the EC does not provide its own suggestions on how the Digital Fairness Act could address the identified regulatory gaps. However, there are indications that the EC may in particular focus on web and app designs that make cancelling subscriptions difficult as well as subscription models that start with a “free trial” but automatically convert into a paid subscription. This may include exploring new rules that would introduce an “easy” cancellation process with few steps (and “clicks”),a “click-to-cancel” function beyond the 14-day-withdrawal period and/or an “explicit consent”-model for the switch of free trials into paid subscription.
These potential measures would broadly align with the solutions suggested by stakeholders as part of the Digital Fitness Check:
With regard to the cancellation process, a number of stakeholders supported introducing an obligation to implement a clear technical function for cancellation in the form of a cancellation button, going beyond the 14-day right of withdrawal. A similar number supported an obligation to send a contract termination confirmation. According to the Digital Fitness Check, especially consumer organizations stated that cancellation processes were generally too complex and still involved the use of dark patterns as well as unreasonable cancellation fees. On the other hand, traders and business organizations stated that prescriptive cancellation functions may pose technical problems and limit interface designs.
To further pre-contractual transparency, stakeholders supported obliging traders to obtain the consumer’s express consent when switching from a free trial to a paid service. Additionally, it was suggested to make it compulsory to provide information on the total cost of the subscription and to highlight the nature of a continuing payment obligation.
Regarding free trials, the Digital Fitness Check outlines the contradicting views expressed by the participants of the public consultation on traders requiring consumers to provide payment information to sign up for free trials. While a number of participants supported a ban of this practice, several traders pointed to the fact that this practice was meant to avoid the abuse of free trials, e.g., by malicious actors or bots aiming to access digital services to spread content for free. Taking away this protection mechanism could result in traders becoming reluctant to offer free trials.
Concluding its assessment, the EC finds the current regulation of digital contracts and subscriptions ineffective, especially as pertains to cancellations and subscription renewals. It also points to the regulatory fragmentation of contract law on national level as a complicating factor. Although the European Commission is cautious in this part of the Digital Fitness Check, the public comments by EU officials together with the Digital Fitness Check suggest that the upcoming Digital Fairness Act will likely cover issues such as subscription cancellations and automatic renewals. Conversely, it could be argued that if the existing legislative framework were consistently enforced and interpreted across Member States, it would already provide adequate consumer protection without the need for new EU-level intervention.
[1] On “Dark Patterns“, ”Addictive Design and Gaming”, “Personalisation”, “Social media commerce and influencer marketing”, “Unfair Contract Terms”, and “Automated Contracting”.
