The slippery slope from loyalty to liability: global regulators targeting exploitative subscriptions and loyalty schemes

Joshua Saffrin Betesh

Junior Consultant,

BVA Nudge Consulting

We’ve all been there…

You come across a new product or service…
You sign-up to a free trial…
You set a responsible calendar reminder to cancel the trial…
…but it takes a PhD to find the “Cancel Subscription” button…

And then: the charges to dispute, the incessant emails clogging up your inbox, and…well, like I said, we’ve all been there.  

The “Roach Model” or “subscription trap” involves making sign-up or subscription incredibly easy, but cancellation very challenging. 

Earlier this year, the US Federal Trade Commission (FTC) announced a new ‘click-to-cancel’ rule, making it easier for consumers to end recurring subscriptions and memberships. This follows the FTC’s ongoing case against Amazon for allegedly using “manipulative, coercive, or deceptive patterns to trick consumers into enrolling in automatically-renewing Prime subscriptions”.  

UK Regulators are also taking action against marketing tactics or ‘deceptive nudges’ that exploit consumer psychology as part of an ongoing consumer enforcement programme focused on “Online Choice Architecture”.  

On subscription traps in particular, the UK Competition & Markets Authority (CMA) held Microsoft accountable for using unclear auto-renewing subscriptions for online gaming services in 2022. Microsoft subsequently agreed to offer annual subscribers a pro-rata refund and the option to end their contract. In 2021, The UK Information Commissioner’s Office fined the car valuation company, We Buy Any Car, £200,000 for sending unsolicited marketing emails and SMS that were difficult to unsubscribe from.  

The line between aggressive retention tactics and psychologically exploitative CX is getting thinner by the day. 

Following on from James’ thoughts for the hospitality sector, we have some questions businesses can ask themselves to check whether their subscriptions or loyalty programmes might be in the regulatory firing line:

Step #1 – Are you being transparent?

Are you making terms and conditions easy to understand and accessible?
Or, are the key details somewhat obscured (e.g. low contrast, small font size, buried in large text, etc.)?

Step #2 – Is the cancellation / unsubscribe process intuitive?

Is the process for ending membership intuitive?
Or, are there multiple steps and hurdles that make it difficult for consumers to opt-out (e.g. steps hidden behind non-intuitive page labels, needing to call a customer centre, etc.)

Step #3 – Are you trying to create positive emotions in your cancellation / unsubscribe process ?

How do you expect customers to react to your cancellation process?  
Do you expect them to be pleasantly surprised by a respectful and helpful process ?
Or, disappointed and frustrated with offboarding ?

Organisations may be concerned about the impacts of these rules on conversions and retention, however, these new regulatory guidelines can create win-win outcomes for businesses and consumers. For example, Blinkist – a book summary app – reported a +23% increase in free trial conversions and a decrease of -55% in customer complaints after a re-design that included a clear step-by-step breakdown of its 7-day free trial period and end-of-trial reminders.  

As the Digital Markets Competition and Consumers Act was published earlier this year, the CMA expects to have the power to decide whether businesses have broken consumer law and fine up to 10% of global turnover. 

We recommend all providers identify any difficulties in cancelling loyalty programmes or subscriptions, or you might find proactive competitors using transparency as a point of difference, and yourself trapped in a sea of complaints and enforcement actions.   

Legal Notice

The contents of this publication are for reference and informational purposes only and may not be current as at the date of accessing this publication. The contents herein do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.