CMA secures changes to Xbox auto-renewal practices

How far do Microsoft’s latest undertakings to the Competition and Markets Authority (CMA) signal a need for all businesses to improve transparency and controls on automatically renewing subscriptions?

The key takeaway

Undertakings given by Microsoft will provide a higher level of transparency for customers purchasing services with an automatically renewing subscription. The CMA is likely to encourage other businesses to take similar measures, so now is a good time to review how fairly your own business is treating consumers on automatic renewals. 

The background

In April 2019, the CMA launched an investigation into online gaming services provided by Nintendo Switch, Sony PlayStation and Microsoft’s Xbox due to concerns about their use of automatically renewing subscriptions possibly breaching consumer protection law. Memberships of these services were offered on an automatic renewal basis, whereby they would renew automatically, and the money would be withdrawn from a customer’s account without any input from the customer. As part of an investigation into the online console video gaming sector, the CMA identified concerns about certain features of Microsoft’s auto-renewing subscriptions, in particular:

• whether it was clear upfront that contracts would automatically renew
• how easy it was to turn off automatic renewal, and
• whether people may not have realised they were still paying for services they no 
  longer used.

The development

In January 2022, in response to this investigation, Microsoft gave a series of undertakings to the CMA, namely:

• to provide more transparent information regarding automatic renewals, including that the membership will renew automatically unless this is turned off, when the automatic renewal will take place, the cost of the membership, and how to receive a refund following an accidental renewal
• to contact customers on automatically renewing 12-month contracts and give them the option of cancelling it and receiving a pro-rata refund
  • to contact customers who are still paying for their services despite not using them, reminding them how to stop payments and, if they continue not to use the membership, eventually to stop taking payments
• to provide clearer information regarding future price increases and ensure that customers know how to switch off auto-renewal if they wish to cancel their membership following the price rise.

Why is this important?

This is the first set of undertakings secured by the CMA from a gaming company regarding automatic renewals. It comes after concerted efforts by the CMA to encourage improvements in consumer protection in this area, having described automatically renewing subscriptions as having the potential to be “severely exploitative” and to harm competition “as better, cheaper or more appropriate products are locked-out while consumers are locked-in”. 
These undertakings may lead the CMA to expect businesses who offer automatically renewing subscriptions to start implementing similar measures. Indeed, Michael Grenfell, the Executive Director of Enforcement at the CMA, said the following in response to Microsoft’s undertakings: “Other companies offering memberships and subscriptions that auto-renew should take note, and review their practices to ensure they comply with consumer protection law”. This could suggest that the CMA will look to ensure that there is a high level of transparency across all automatically renewing subscriptions, whichever industry you’re in. More broadly, outside of the CMA’s expectations, if more businesses undertake similar steps to improve transparency, it may become an expectation of consumers that businesses will be upfront about any automatically renewing subscriptions at the outset.

Any practical tips?

In order to improve transparency regarding automatically renewing subscriptions, digital businesses should: ensure that the fact that a subscription will renew automatically is stated clearly upfront; provide clear instructions on how to cancel a subscription (eg by including a page setting out how to cancel an automatically renewing subscription in the customer services section of the website); and consider whether they have a means of identifying customers who are paying for services that they do not use under automatically-renewing subscriptions and how they can be contacted to ensure that they are aware. 

Spring 2022