Auto-renewal contract provisions are now used widely across sectors – from digital services to recurring home subscriptions. If your business uses or plans to introduce subscription models, you must ensure that your contracts are legally compliant and transparent to avoid breaching consumer law and damaging customer trust.
Complaints often arise when cancellation terms are unclear or auto-renewals are triggered without clear notice. With the Digital Markets, Competition and Consumers Act 2024 set to introduce stricter rules, it's essential to act now.
Our commercial law solicitors can help you review your contracts, clarify your processes, and ensure your auto-renewal terms meet both current and upcoming legal standards, while strengthening customer confidence.
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The law is changing
Understanding and complying with the law that underpins subscription contracts is more important now than ever, as the Digital Markets, Competition and Consumers Act 2024 (DMCCA) will introduce significant changes to the regulation of subscription contracts with consumers.
Details of the new rules will be set out in secondary legislation, which is expected to be published in April 2026. If you're running an e-commerce, tech or software as a service (SaaS) business offering subscription services to consumer customers, you need to act now to:
- Review your business-to-consumer (B2C) contracts, assessing the practical changes to your customer transaction process that the DMCCA will require
- Review your auto-renew provisions to ensure they are compliant, and
- Train your staff on the new compliance requirements.
Our commercial solicitors can help you look ahead to the new legal framework and ensure that your business is prepared.
In the meantime, your business needs to ensure that it’s complying with the existing law on auto-renew contracts; otherwise, you risk being in breach of current legislation. Being on top of the current rules will provide a solid foundation for complying with the new ones, so read on for guidance on making sure your business is compliant with the law as it stands at the moment.
What are auto-renew provisions?
If your customer’s contract is automatically renewed unless they take active steps to cancel their subscription, this is an auto-renew contract. Many sectors utilise auto-renewal provisions in contracts to enhance customer loyalty; however, this can lead to complaints, especially if the customer was not sufficiently aware of the auto-renewal or if it is difficult to cancel the contract.
Whilst subscription models may encourage some customers to continue their contract (because it’s easier than shopping around or taking positive steps to end the contract), the inappropriate use of auto-renew provisions can breach guidance and damage your brand.
If your business is already using auto-renewal provisions, or is considering doing so, then to avoid penalties, you must:
- Ensure that your contractual terms are fair, and
- Follow general legislation and industry-specific regulations and guidelines.
By adopting best practices and avoiding the overuse of the subscription model, your business can prevent customers from being deterred from contracting with you due to the difficulty of ending their agreement. We can provide you with pragmatic and practical contract legal advice to help you make the most of your subscription contracts and foster good relationships with your customers.
Regulatory provisions and auto-renewal
The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013/3134 (CCRs) apply to distance selling contracts (where a business sells goods or services without face-to-face contact, using online platforms, phone, or email). If your auto-renew agreements fall into this category (for example, a subscription service entered into exclusively via a mobile app would be a distance selling contract), take a look at our article on Distance selling regulations: returns, refunds and consumer rights.
What might be unfair renewal terms?
Subscription model contract terms may be considered unfair to consumers if they are unclear or ambiguous. For example, a customer will have a legitimate complaint if:
- The contract does not specify the length of the contract.
- The pre-contract information does not say that the contract will automatically renew unless cancelled.
- There is no explanation about how a consumer can cancel the subscription. This is known as the ‘subscription trap’, where customers have to go through loopholes to find out how to cancel a subscription that will otherwise automatically roll over by default. The subscription cancellation steps may be particularly challenging for customers who require additional support, such as older adults and those with disabilities.
- No reminder is sent to advise that the contract is due to renew unless cancelled by the consumer automatically, or the reminder does not explain the steps to be taken to cancel the subscription.
- An unreasonable cancellation fee is charged to end the contract.
- The customer is not informed about a price hike at the end of the contractual period, and the contract automatically renews on revised terms that are significantly disadvantageous to the customer compared to a new customer. This is known as the ‘loyalty trap’.
The key points to be aware of here are that:
- Whilst few customers may read the fine print of their broadband or mobile contract, the detailed contractual terms must be drawn to their attention before purchase, and they must confirm that they have read, understood, and accepted them.
- Any unclear term that ties a customer into a subscription contract could be deemed unfair if the business has not made the subscription nature of the contract and its precise terms clear to them.
- The customer must be provided with the terms before they are asked to commit to the contract.
Acceptable terms in subscription contracts
Your business needs to comply with industry-specific regulations, any applicable standards laid down by regulatory bodies, and the updated Consumer and Markets Authority (CMA) core principles. In some situations, the CMA recommends that the core principles be made a legal requirement to prevent companies that do not follow them from gaining an unfair advantage over those that do.
Choice of contract entry
Choice on contract entry should be the default position. The consumer should be able to choose from the outset whether to agree:
- A fixed-term contract, or
- A contract with automatic renewal.
The CMA believes that this will give consumers greater choice - they can either have the peace of mind of auto-renewal or elect a fixed-term contract, without having to engage in a time-consuming process to end the auto-renewal, and without incurring penalties if they forget to cancel or get their cancellation timing wrong.
The CMA makes it clear that choice on contract entry should be the case, even in sectors and industries where there is a legal requirement to have a contract (for example, a car owner with a vehicle on the road is required by law to have motor insurance).
In regulated sectors, such as energy, the subscription auto-renewal model may not be the preferred choice for suppliers. Instead, they may prefer indefinite-term contracts with discounted prices for an initial period. However, they must clearly state how prices will change at the end of the discounted period and how a consumer can terminate their supply contract.
Some companies continue to sell their services using an auto-renewal model with no provision for opt-out before purchase. In the digital and technology sector, the antivirus services provided by McAfee and Norton are subject to undertakings that allow the companies to offer only auto-renewal contracts. There is no provision to opt out of auto-renewal on contract entry. However, the undertakings are intended to provide consumer safeguards, such as informing them of:
- The auto-renewal nature of the contract
- The costs should the contract be renewed, and
- How to opt out of the auto-renewal after taking out the fixed-term contract.
Notwithstanding the undertakings, the CMA Anti-virus Compliance Principles suggest opting in to auto-renewal for antivirus products.
Pre-contract information
Before a customer commits to a contract, they need the following pre-contract information:
- The length of the contract
- Whether the contract will automatically renew
- How the subscription will renew
- If the customer receives a reminder about the subscription renewal
- Price increases on contract renewal
- The length of the renewed contract
- How to stop the automatic renewal of the contract
- Cancellation and refund rights.
Pre-contract information must be clear and visible. The customer should ideally be asked to confirm that they have read, understood, and agree to the pre-contract information.
Price increases and changes to the product
Generally, businesses should not increase prices or change their products or services without consumer consent. This is not as difficult as it sounds, as most subscription model contracts contain a price increase clause that outlines how to calculate an increase to the contract price and specifies the frequency of price rises. Likewise, many contracts contain a clause that allows the supplier to substitute goods of the same value or make minor product changes.
The key point is that the contract must clearly outline the mechanism for price increases and changes to the product. Additionally, when a contract is due for auto-renewal, a business should provide information about the fees that will apply after the contract is renewed.
Exit fees
Exit fees can be charged after the expiry of a cancellation period but should not be charged when the initial minimum contract term expires. Exit fees should not be excessive, and notice periods (where contracts permit notice to be given to end the agreement early) should be reasonable. For example, a 9-month notice period to cancel and exit a 12-month contract appears excessive.
No renewal when not in the customer’s best interests
Subscription contracts shouldn’t be renewed when it is not in the customer’s interests. Some companies have automatically renewed contracts when it would have been easy for them to check whether consumer usage of the services or products justifies renewal. For example, in the sports sector, if a gym membership is unused or, in the tech sector, if there have been no film, book or game downloads, then it would not be in the customer’s best interests to automatically renew the contract.
A business should not take advantage of auto-renewal provisions where the customer does not expect to continue receiving the product or service after the initial contract ends. Your company should have systems in place to prevent auto-renewal if your products and services are not being used.
There are particularly sensitive issues when a consumer may experience reduced capacity due to age, ill-health, or if a customer has died without relatives being aware of the subscription model contract. In the July 2021 CMA Reform Consultation, the government inquired whether companies should be required, after a reasonably long period and upon evidence of inactivity, to provide notice of suspension of the contract and to cease charging the subscription fee.
Right to cancel
There should be a right to cancel most subscription model contracts on initial contract entry and auto-renewal of the contract.
The CCRs contain cancellation rights for most auto-renew contracts, depending on whether the contract was entered into online (distance selling) or off-premises. The CMA recommends that even if the CCRs do not give the right to cancel, business owners should provide one in all cases. The CMA Unfair Terms Guidance states that cancellations should not be subject to financial penalties, and the cancellation procedure should not result in the consumer being unfairly tied into the contract.
Best practice tips for auto-renewal provisions
Our commercial contract solicitors have the following best practice tips for auto-renewal contracts:
- Take a long view – whilst it can be tempting to try to tie consumers into a subscription model contract and make it hard for them to exit the contractual relationship because of auto-renewal, customer loyalty based on how difficult it is to exit a contract is not the type of loyalty your business wants to attract. Whilst most companies want to scale up or maintain their market share, the speed of gaining clients on auto-renewal contracts can create cost and damage your business reputation, so it is best to take a long view.
- Be positive – auto-renew contracts are often seen as a way to create consumer loyalty by tying in. There are ways to build loyalty that don’t risk customer dissatisfaction or allegations of unfair terms. Examples include excellent customer service, competitive pricing, innovative products, speedy delivery, or a unique selling point that makes a brand stand out from the crowd and its competitors.
- Plain English – auto-renewal provisions in consumer contracts must be straightforward to understand. The customer will then have a lower chance of successfully arguing that they did not understand what they were signing up for. If they do complain, your business has the evidence to show that you made your contractual terms clear at the pre-contract stage.
- Don’t hide information – there is little point in writing an unambiguous auto-renew contract if the information is then hidden from view. The customer must be able to easily locate the information before committing to the agreement.
- Simple process – the auto-renewal clause may be written, but if your cancellation deadlines and procedures are complicated, you risk the contractual terms being found to be unfair. Make the cancellation provisions easy to follow, so they don’t result in a customer becoming so frustrated that they write a poor review or complain to a regulatory body.
- Know your market – different pre-contract information on auto-renewal provisions will be required, depending on whether your product is aimed at a digitally confident customer base or those who need additional support due to age, ill health, or other factors, such as stairlift insurance products for customers with special care needs that require tailored solutions to address their specific requirements. Thought should be given to the requirements of the Equality Act 2010 and the need to make reasonable adjustments to ensure your business can accommodate all its customers.
- Look at the cost of customer complaints – complaints and complaint handling are costly, so whilst auto-renew contractual provisions may generate customer tie-in, their benefits need to be assessed against the cost of related customer complaints. Carry out a cost-benefit analysis to check whether your business is getting the maximum benefit from subscription model contracts. Assess the non-obvious costs to the company, such as complaint handling, the greater risk of contract disputes, and potential for reputational or brand damage.
- Review subscription model contracts – CMA guidance, sector-specific regulations and competitor practices are constantly changing, so your auto-renewal provisions need to be reviewed and kept up to date with industry standards and best practice. It’s essential to regularly review commercial contracts, including subscription model contracts, to ensure they adhere to current best practices.
Stay compliant and customer-focused with your auto-renewal terms
The upcoming changes under the Digital Markets, Competition and Consumers Act 2024 will only sharpen the focus on fair and transparent auto-renewal practices. Whether you already offer subscription services or plan to, reviewing your processes now is vital to avoid future complications. Compliant contract terms aren’t just a legal requirement – they’re an opportunity to strengthen trust and reduce costly disputes.
Our commercial law solicitors can help you review your contracts, update your subscription model, and ensure your business is prepared for both current and incoming legal standards. With our sector-specific guidance, you can stay ahead of regulatory changes while delivering a clearer, more reliable customer experience.
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