Good Food, FabFitFun, Netflix, Spotify... More and more online companies are changing their business model: they no longer offer a specific product or products, but rather a subscription giving access to a service enabling the delivery of goods or access to a virtual library. To attract customers, these companies offer their subscriptions in the form of negative-option contracts: consumers benefit from a free or discounted trial period, after which they are automatically subscribed to the service at the current price.
This type of contract has come in for some criticism, and in this report we wanted to find out more about it. Do automatic subscription contracts following a free or discounted trial period pose problems for consumers, and if so, what are the consequences for them? Can consumers easily cancel such contracts, and are they given instructions on how to do so? Is the practice of offering a subscription automatically following a free or discounted trial period governed by Canadian legislation and that of other countries? If so, are consumers well protected, or could they be?
Our study of the legislation revealed that the practice in question is prohibited in Quebec and Manitoba, but is not regulated elsewhere in Canada. In the European Union and the United States, rather than prohibiting the practice, disclosure requirements have been introduced for merchants. We found several of these obligations interesting. These include notifying consumers of the end of the trial period, providing them with information on the content of trial periods, providing them with easy-to-understand information on how to unsubscribe, and obtaining their clear consent before sending them an invoice.
Our analysis of the contracts revealed that, in the medium term, automatic subscription to a service often represents a substantial sum for consumers, in excess of $100 per year. We also noted a great lack of uniformity between the contracts analyzed: they are given various names, but never the "contract", they all contain different clauses, and their unsubscription clause is incomplete. This makes it difficult for consumers to find their way around. When it comes to terminating these contracts, we have seen that companies offer little flexibility, often proposing only one method of termination. Given these observations, we wonder whether a consumer who wishes to terminate his subscription before the end of the trial period will be able to do so successfully.
Finally, we consulted some 50 Canadian consumers from Quebec, Ontario and British Columbia. Most of them had signed up for automatic subscriptions following free or discounted trial periods. They said they were aware that these trial periods were temporary and were followed by a subscription. They mentioned that they did not feel they had been tricked by this practice, and that they were satisfied with their subscription.
On the other hand, participants said they didn't like giving out their payment information when they were offered a free or discounted trial period. They would have preferred to give this information only at the end of the trial period. During the consultation, we also found that participants don't read subscription contracts by default because they find them too long.
This report contains valuable information on the framework for automatic subscription contracts following a free or discounted period. We have learned from the consumers we interviewed that they appreciate these trial periods followed by an automatic subscription. However, we believe that the procedures used, particularly with regard to the information provided to the consumer, need to be improved. For, if they forget, consumers may have to spend large sums of money for a service they don't want. Fortunately, solutions do exist and can be implemented.
