Escaping the subscription ‘trap’

It’s an unpleasant practice, with a suitably unpleasant name.
If you find it all too easy to sign up to a new online subscription, only to face significant obstacles when you want to cancel that same subscription – by being forced to navigate multiple webpages without clear options, or even having to cancel via phone or in person – you might have entered the ‘Roach Motel’.
The term comes from the eponymous cockroach traps which lure the insect in with bait, then trap it in place with a sticky substance: as the tagline for the original brand puts it, “Roaches check in, but they don’t check out!”
The United States is pushing for businesses to take a more humane approach to the subscription cancellation process, with the country’s Federal Trade Commission earlier this month announcing proposed rules that would require only “one or two clicks on your phone” to cancel a service.
It’s been welcomed by consumer advocates in the country – but is there a case for New Zealand to follow suit?
While our consumer protection laws hold up well compared with the rest of the world, Consumer NZ chief executive Jon Duffy says the subscription process is something of a grey area at present.
The Consumer Guarantees Act requires companies to exercise “reasonable care and skill” when providing a product to someone, while the Fair Trading Act bars “misleading and deceptive conduct”.
Both are useful pieces of law, but Duffy says neither is entirely sufficient to capture some of the more questionable practices in the subscriptions space.
“The really mischievous behaviour in the space is where the business isn’t saying you can’t unsubscribe – they’re just making it really, really difficult for you to find the mechanism to do that, and they can always fall back on, ‘Well, we did provide an opportunity for someone to unsubscribe, it’s not our fault that they couldn’t find that’.”
There is a clear imbalance of power between digital providers and consumers, he says, with very few people likely to check the cancellation terms for a service as they sign up to it. At the point they decide they no longer want it, it is too late to avoid the fish hooks and convoluted processes.
The US isn’t the only country looking to clamp down on questionable cancellation practices.
Last year, France implemented a ‘three clicks to cancel’ rule for insurance contracts, while Germany went one better a year earlier, with a ‘two clicks to cancel’ law covering all online subscription services.
The European Union has broad rules against unfair commercial practices that have made a difference, with Amazon Prime forced to change its cancellation process in Europe from “multiple pages containing distracting information and unclear button labels” to a simple two-step process.
There are changes being made closer to home, too. Paul Comrie-Thomson, a partner at law firm Wynn Williams who specialises in competition and economic regulation, says the Australian Competition and Consumer Commission has been working on broader prohibitions against unfair trading practices that could close a similar loophole in their legislation.
One direct solution comes in the form of a member’s bill from Labour MP Cushla Tangaere-Manuel, which would force businesses to let consumers cancel subscriptions the same way they signed up (online, for instance), or “in any way (oral or written) that shows their intention to cancel or withdraw from the subscription”.
Tangaere-Manuel inherited the bill from former Labour MP Naisi Chen, but says it is legislation to which she can relate.
“I’ve actually had to cancel a credit card to get out of one of these subscriptions in the past, so I don’t want people to go through this – it’s totally avoidable, especially at a time where people are struggling to make ends meet.”
Allowing people to both buy and cancel a subscription through the same means is just common sense, she says, rather than the “trickery” that some firms employ to stop customers from leaving.
While the bill is currently at the mercy of Parliament’s all-powerful ‘biscuit tin’ ballot, Tangaere-Manuel says there is a strong case for the Government to pick it up itself, or at least provide its backing should it be drawn.
“I would absolutely support that. This is something that there should be bipartisan – multi-partisan – support for, because it protects the rights of New Zealand consumers.”
Comrie-Thomson would also like to see the Labour MP’s bill make it into Parliament, at least to start a debate and look at the best way to tackle the issue.
In a statement, Commerce and Consumer Affairs Minister Andrew Bayly offers his sympathy to people who struggle to cancel subscriptions, saying it should be an easy and straightforward process, but notes he has “not been advised of substantial problems in this area”.
There is a faint glimmer of hope, however. Bayly says he plans to start a review of the Fair Trading Act next year, which could look at the current cancellation terms and processes and whether there is a case for change.
There are less direct ways in which New Zealand businesses could be forced to change their approach.
For instance, there’s “the Brussels effect”, in which legal and regulatory changes within the EU and its market of roughly 450 million people spill beyond Europe’s borders and across the rest of the world.
“If you look at what happened with cookie disclosure when the GDPR [General Data Protection Regulation] rolled out in Europe, we just inherited all of that, because businesses saw no sense in having a two-speed regime for Europe and elsewhere in the world,” Duffy says.
There is no guarantee that will happen, however: Comrie-Thomson points out that Amazon Prime still runs its more convoluted cancellation process in Australia, rather than the two-step process it was forced into for European customers.
So until the Brussels effect takes hold, or the Government takes action, the best advice is probably to take an extra close look at those cancellation terms before stepping into a new subscription that could be harder to exit than you expect.