Consumer cheer as watchdog acts on auto renewal contracts

31/01/2022

Consumers stand to gain after the Competition and Markets Authority took aim at Microsoft’s approach to automatically renewing some gaming services subscriptions.

Following an investigation amid concerns that some of its current practices breached consumer law, Microsoft has agreed to change its approach with immediate effect.

Risks of inaction

Microsoft’s Xbox Live Gold and Game Pass products allow access to online multiplayer gaming. Memberships are entered into on an auto-renewal basis meaning that the contract renewed automatically at the end of a fixed term incurring further charges. This has been a particular issue of concern for many consumers who may have forgotten about such renewal, failed to understand the implications, or may have simply stopped using the service all together and yet continue to pay for it.

Reasons for the CMA’s involvement

Although an automatically renewing contract is not in breach of consumer law as such, the CMA identified a number of specific concerns with the practice generally. They wanted to investigate whether it was sufficiently clear at the outset that the contracts would automatically renew, how easy it was to opt out, and whether people realised they were paying for services that they no longer used.

Consumer victory

Microsoft’s undertakings given in the wake of the CMA investigation seek to address all of these issues. Although its contracts will still renew automatically, they have agreed to provide more transparent initial information about membership terms. This will state that the subscription will automatically renew unless turned off, when it will take place, and how much it will cost.It will also state how a refund can be obtained in the event of accidental auto-renewal.Notably the undertakings are not an admission of liability.

Microsoft have also agreed to offer current customers, particularly those that are not actively using the service, the option of terminating their memberships and claiming a pro-rata refund.

Market practice

The CMA’s initial investigation also extended to the market practices of Nintendo Switch and Sony Playstation. But the implications extend far beyond just online gaming, with increasing numbers of consumer services offered on an automatically renewing subscription basis. Not only are many gym memberships offered this way, but it is also the practice of choice for streaming television and music services, domestic utilities and many others. It will be interesting to see whether the measures that Microsoft have agreed to put in place will extend into any other areas where such contracts are commonplace.

Dealing with consumers

Nothing in Microsoft’s undertakings prevents it from automatically renewing consumer contracts. Similarly, the CMA has not called for it to be stopped. But what this shows is that the CMA is prepared to step in where it believes market practices are contrary to the interests of consumers and that service providers must make contract renewal terms clear and transparent enough for consumers to make an informed decision.

More information

If your business deals with consumers and has, or is considering, using a contract that automatically renews following an initial term, you would be well advised to seek specialist advice from the Pinney Talfourd commercial team.

This article was written by Edward Garston, Partner in our Company & Commerical Team. The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as of December 2021.

31/01/2022

Authors

Edward Garston

Partner

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