ACCC warns consumers to beware of subscription traps

22 June 2016

The Australian Competition and Consumer Commission is warning consumers to ensure they check the conditions and fees payable for ongoing membership services in connection with discounted online purchases.

Fabletics, a US-based exercise clothing retailer, has cooperated with the ACCC and agreed to change its website after the ACCC raised concerns about inadequate disclosure of conditions and the ongoing costs of its “VIP” membership program.

Following their first purchase of discounted active wear clothing, Fabletics’ customers were charged a monthly US $49.95 subscription charge for VIP membership. This membership entitled customers to purchase active wear each month using a membership “credit” gained through their monthly payments.  The ACCC received complaints that some Fabletics customers were unaware they had signed up to monthly subscription payments, and some had difficulty cancelling their memberships.

The ACCC was also concerned, following customer complaints, about another online retailer, Scootprice, failing to adequately disclose the fees for its “Premium” membership, which ranged from $29.90 per month to $99 per quarter. The ACCC also received complaints that some Scootprice customers were unaware they had signed up to ongoing subscription payments. Scootprice has since cooperated with the ACCC’s investigation, including by refunding customers who it signed up to its Premium membership without being fully aware of the fees payable for this service.

 “We are putting online retailers on notice that they must clearly and prominently display any ongoing membership fees and we are warning consumers to look out for them when shopping online,” ACCC Chairman Rod Sims said.

“Issues being encountered by consumers range from lack of disclosure of conditions and monthly payments as with Fabletics and Scootprice, to ‘subscription trap’ conduct by online retailers.”

“The ACCC has seen a spike in complaints from unhappy consumers regarding the use of the relatively new ‘subscription trap’ model by online retailers. This involves online retailers treating a consumer’s decision to make a single purchase as consent to signing them up to a paid, ongoing subscription service without adequately disclosing that the subscription service involves ongoing fees,” Mr Sims said.

“The ACCC will continue to monitor any further complaints in relation to these issues and will not hesitate to take appropriate enforcement action against online retailers who attempt to utilise subscription traps in the future.”

Both Fabletics and Scootprice have cooperated with the ACCC by committing that they will make any ongoing membership fees clearer and more prominent in their website communications and throughout the checkout process.

Background

‘Subscription trap’ is a term used to describe online retailers treating a consumer’s decision to make a single purchase as consent to signing them up to a paid, ongoing subscription service without adequately disclosing that the subscription service involves ongoing fees. Generally, this involves consumers being enticed into the membership option with a discounted price offer for an initial purchase of goods or services.

Benefits commonly offered to consumers to make the subscription services attractive include free shipping, lower prices compared to non-subscribers and special member/subscriber only offers.

The ACCC and consumer regulators around the world consider subscription traps to be an emerging issue. Complaints show that consumers making purchases online have been automatically signed up to membership programs believing they were free to join. Some businesses disclose the ongoing payments however it can be buried at the bottom of long webpages, a number of clicks away, or in fine print or confusing terminology. By the time some consumers realise that ongoing payments are involved, hundreds of dollars may be lost.

While these membership programs may offer genuine benefits for consumers, any charges involved should be clearly disclosed so that consumers are able to make an informed decision about whether to join.

All businesses must provide clear information to consumers about the cost of goods and services, including ongoing subscription services.

Consumers should also be careful when making purchases online as some retailers may do the following:

  • not be upfront about additional costs such as subscription fees
  • not clearly disclose the nature of subscription services
  • not make the terms and conditions readily available by hiding them away on separate pages, in hard to read grey text or fine print
  • place restrictions on the cancellation of the unwanted services
  • use pre-checked boxes that require consumers to actively opt out.
Release number: 
MR 112/16
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