April 17, 2023
At the end of last month the Committee of Advertising Practice (CAP) published a new Enforcement Notice on the digital advertising of “free trials” and other promotional subscription models. The Enforcement Notice comes off the back of a dataset obtained by CAP which suggested that some advertisers are not complying with existing CAP guidance on this topic. This latest data, combined with research that shows there has been a significant increase in the size of the subscription market in recent years, has put the Advertising Standards Authority (ASA) on high alert.
The Enforcement Notice emphasises that all ads must make clear, visible and prominent:
- whether the paid subscription starts automatically after the trial;
- the extent of the financial commitment if the subscription is not cancelled; and
- any other significant conditions.
It is not enough to simply state that ‘Ts&Cs will apply’.
CAP has requested that all advertisers in the subscription services market immediately review their advertising to ensure that ads appearing online which promote “free trials” and other promotional subscription models comply with the CAP code, noting that after 27 April 2023 CAP will “take targeted enforcement action to ensure a level playing-field”.
The committee’s concern with promotional subscription models is around the risk that a consumer may unknowingly enter into an ongoing payment plan or what is now being referred to as a “subscription trap”. Advertisers are therefore required to ensure that all the significant conditions about such a plan are clearly and prominently communicated to consumers prior to purchase.
Amazon Prime ruling
Following the release of the Enforcement Notice, the ASA has since published a revision of a ruling it made on an Amazon.co.uk advertising campaign from 2019 which offered free trials of its Amazon Prime subscription service.
Whilst the decision to uphold the complaint was maintained by the ASA, the grounds for the decision have been revised.
The ad concerned featured as part of the checkout process on Amazon.co.uk. The ad provided consumers with options to sign up to Amazon Prime (a paid subscription service) at checkout. If the customer selected an Amazon Prime option this would automatically sign the customer up to a paid subscription plan unless this was cancelled within 30 days.
The ad included three options, one gold box with text in bold which stated, “Order Now with Prime”. Underneath this a second option, included within a grey box, stated, “Continue with FREE One-Day Delivery Pay later”. The third option, presented in blue text, stated “Continue and don’t gain Amazon Prime benefits”. The following small print was then included at the bottom of the webpage, “By signing up you acknowledge that you have read and agree to the Amazon Prime Terms and Conditions and authorise us to charge your credit card … after your 30-day free trial …”.
Complaints about the ad challenged whether it was misleading as the complainants believed the way the options were presented by Amazon was unclear.
The grounds on which the ASA decided to uphold the complaints include the following:
- the presentation and the wording of the text used for the options to sign up to Amazon Prime (the gold box in bold text) were significantly more prominent than the option to continue without signing up to a Prime subscription;
- the third option to continue without “Amazon Prime benefits” was in a faint blue colour against a white background and was not in bold. This was similar to how the small print was formatted and was also placed in a location that the ASA considered could be easily missed by consumers;
- the “overall impression” of the payment page or the “online choice architecture” (i.e., the design of online environments which affects consumers’ decision making) was confusing;
- it was not possible to go back and change the choice selected, so customers would need to cancel the subscription separately;
- the ASA considered the second option represented a “non-Prime” option, however this was not the case; and
- it was likely that the average, reasonably well informed and reasonably observant consumer would miss the option to continue without signing up.
Key takeaways for advertisers in the subscription services market
Following the Enforcement Notice and the revised Amazon ruling, CAP has also issued a further article with a reminder of the relevant rules and tips to make sure ads are compliant. It’s clear from this recent activity that the ASA will be placing increasing focus on the advertising of promotional products relating to subscription services.
Advertisers should consider:
- the overall impression of their payment pages;
- their ‘online choice architecture’; and
- how ads are incorporated into this stage of the customer journey.
As the ASA points out in the Amazon ruling, consumers are likely to be drawn to the bottom right of the payment page (where purchase or continue buttons typically appear), so using ads in this space should be carefully considered. Significant terms about products or services advertised, such as automatic sign up to an ongoing payment plan, should be clearly flagged to customers prior to purchase. These types of terms should be stated clearly and placed in close proximity to the ad’s call to action.
‘Subscription traps’ and the CMA’s upcoming increased enforcement powers
Advertisers should note that the Competitions and Markets Authority (CMA) has also been very active in monitoring the subscription services market. The upcoming Digital Markets, Competition and Consumer Bill (see our helpful one-page summary here) will introduce new rules to tackle ‘subscription traps’.
As the Bill will also give the CMA significantly increased enforcement powers to act against breaches of consumer law (including the ability to impose fines of up to 10% of annual global turnover), it’s even more important for online businesses to consider the promotional methods they are using for subscription services.
To keep up to date with all the latest developments on the Bill, follow our tracker here.