CMA targets anti-virus software companies on subscription auto-renewals
What consumer rights concerns have the Competition and Markets Authority’s (CMA) recent enforcement actions raised, especially with regards to automatic subscription renewals?
The key takeaway
Auto-renewals remain under the regulatory spotlight, with the CMA recently acquiring undertakings from McAfee Ireland Limited (McAfee) and NortonLifeLock Ireland and UK (Norton) to combat their subscription practices which the CMA deemed potentially unfair for consumers.
The CMA began an investigation into the anti-virus software sector in 2018 in the light of concerns that some companies may not be complying with consumer protection laws. The investigation focused particularly on the fairness of: (i) whether automatic renewal is set as the default option; (ii) whether notification of renewal is sent and, if so, the timing of the notification; and (iii) when renewal payments are taken and whether the renewed subscriptions are charged at a different price to the original subscription.
Following the investigation, both McAfee and Norton gave voluntary undertakings to the CMA in May and June 2021 respectively. The undertakings seek to make changes so that automatically renewing contracts is easier for consumers to understand and exit. More specifically, the undertakings include:
- giving customers whose contract has auto-renewed an ongoing right to exit the contract and obtain a pro-rata refund of the amount they have been charged, after their existing refund window has expired (also extended to customers who asked for a refund in 2020, but were refused) – the right will be available to consumers from 24 August 2021 onwards
- making refunds available through an automated system to make it simple and easy
- ensuring customers are made aware, up front, that their contract will auto-renew, the price they will be charged for the product upon renewal and when the money will be taken
- where the price will be higher on auto-renewal, not giving the impression that the initial price represents a saving by comparison, and
- contacting customers who have not used their product for a year to advise them of the fact and make their options clear, including the ending of their subscription.
Following the above undertakings, the CMA ended its investigations into the anti-virus sector.
Why is this important?
The CMA’s actions show clear intent to crack down on automatic renewals that are not compliant with consumer protection law. This is relevant to all businesses, not just those engaged in anti-virus software.
Any practical tips?
The undertakings give a clear indication of the types of steps the CMA expects companies to be taking when providing auto-renewals. Consider checking:
- the extent to which your consumers are subject to auto-renewals and whether there is a right to exit
- whether consumers are appropriately informed, and are aware, that their contract will auto-renew, the price (including any future increases to the renewal price) and when any payments will be charged, and
- if consumers are contacted where they have not used your product for over a year, and whether there are processes to advise them of this and make their options clear to them.