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.
ECJ decision
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.
Background facts
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.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.