1 June 2018
Silence is consent - Opting out in the Digital Age
Good Food, FabFitFun, Netflix, Spotify ... Increasingly, online companies are changing their business model: they no longer sell products directly, they sell subscriptions to a service that supplies products or provides access to a virtual library. These companies attract customers by procuring their subscription by means of a negative option contract: after profiting from a free trial or discount, consumers are automatically subscribed to the service.
This type of contract has been the target of some criticism, and in this report, we wanted to learn more about it. Does being automatically subscribed following a free trial or discount pose problems for consumers, and if so, what are the consequences for them? Can consumers easily terminate such contracts and how do they go about it? Is the practice of automatically applying a subscription following a free trial period or a discount regulated by the laws of Canada and other jurisdictions? And in such cases, are consumers well protected or could they be better protected?
Our study of the legislation revealed that this particular practice is prohibited in Québec and Manitoba, but is not regulated elsewhere in Canada. In the European Union and the United States, rather than banning the practice, the authorities impose precise disclosure requirements on merchants, some of which we found interesting.
These include sending notification of the end of the trial period, providing information on the content of the trial period, giving consumers easy-to-understand instructions on how to cancel, or “opt out” and obtaining clear consent prior to sending them an invoice.
Our analysis of the contracts revealed that automatic subscription to a service often involves significant expense for consumers in the medium term: over $100 per year. We also found that there was a great lack of uniformity in the contracts we analyzed: they are given various names, but are never called a “contract”; they all contain various clauses and the cancellation clause is incomplete, making it difficult for consumers to understand their options.
When it comes to terminating these contracts, we observed that the companies demonstrated little flexibility, often offering only one termination mode. Facts such as these led us to wonder whether consumers who wish to cancel their subscriptions before the end of the trial period would in fact be able to do so. Finally, we carried out a consultation with fifty Canadian consumers from Québec, Ontario and British Columbia.
The majority of these consumers had been automatically subscribed following a free trial period or a discount. They claimed that they were aware that these trial periods were temporary and would be followed by a subscription. They said they did not feel that they had been trapped by this practice and were satisfied with their subscriptions.
On the other hand, the participants said they did not like providing their payment information prior to receiving a free trial or discount. They would have preferred to give this information only at the end of the trial period. During our consultation, we also found that the participants almost never read the subscription contracts because they found them too long.
This report presents valuable information on the regulation of subscription contracts that come into force automatically following a free trial period or a discount. We found that the consumers we interviewed appreciated having free trial periods and discounts prior to automatic subscription. However, we believe that the procedures employed, particularly with regard to the information provided to consumers, need to be improved.
Through lack of attention, some consumers could end up having to spend a large sum of money for a service they do not want. Fortunately, solutions exist and can be implemented.