UK and EU law gives consumers a 14-day period to withdraw from distance contracts. However, when entering into auto-renewing subscription contracts, often following an initial free trial, there has been doubt whether such withdrawal right arises upon every automatic renewal. A recent decision by the ECJ has clarified that consumers have only one right to withdraw, at the start of the free trial, provided they receive clear pre-contract information about subsequent payments.
On 5 October 2023, the ECJ issued a preliminary ruling regarding consumers' withdrawal rights in auto-renewing subscription contracts governed by the Consumer Rights Directive (2011/83/EU) (CRD). The CRD grants consumers a 14-day window to withdraw from distance or off-premises contracts and, in the UK, this right to withdraw was incorporated into the Consumer Contracts (Information, Cancellation, and Additional Charges) Regulations 2013/3134.
In this case, Verein für Konsumenteninformation v Sofatutor C 565/22, the ECJ was asked to determine whether consumers possess multiple withdrawal rights when a contract transitions from a free trial to a paid-for subscription and then subsequently auto-renews.
The ECJ clarified that consumers only have a single right of withdrawal, which occurs at the initiation of the free trial, provided that the consumer has received clear pre-contract information about subsequent payment obligations.
The case on which the ECJ ruled involved an online platform offering educational services. The platform's standard terms included a 30-day free trial period, followed by an automatically renewing paid subscription unless terminated with sufficient notice. The platform initially informed consumers of their right to withdraw at the contract's outset.
An Austrian consumer protection association contended that Article 9(1) of the CRD provided consumers with withdrawal rights at multiple points, as follows:
- upon registering for the free trial;
- when the paid subscription begins; and
- at each subsequent auto-renewal.
The ECJ ruled that the primary objective of the right to withdraw is satisfied when consumers receive comprehensive pre-contract information about pricing. When consumers are adequately informed about future payments following the free trial, the consumer requires no further withdrawal rights when the free trial transitions into a paid subscription or when the paid subscription auto-renews. However, the ECJ did raise a cautionary note that if consumers have not received clear, pre-contractual notification of post-free trial payments, they retain a fresh withdrawal right after the conclusion of the free trial period.
As UK courts may consider ECJ decisions, it is important to note that this ruling is relevant to any businesses that engage in subscription contracts with both UK and EU consumers. The decision reinforces the need for such businesses to provide clear, pre-contractual notification of post-free trial payments if they wish to avoid consumers acquiring withdrawal rights upon expiry of the initial trial and at every subsequent automatic renewal.
If you require any further information in relation to this area please do not hesitate to contact David Bond.
Sign up to our email digest