Shopping online is an automatic part of almost every consumer’s life.  It allows them to purchase products from all over the world that might not be available in Australian stores.  However, the Australian Competition and Consumer Commission (ACCC) is urging Australians to be aware of that some online retailers engage in dubious commercial behaviours. The most notable example of such practices is the ‘subscription trap’.  And despite being an increasingly important international issue, many consumers are unsure what a subscription service is. To address this gap, this article explains what subscription services are, how they can trap even the savviest of online shoppers and why it matters legally.

Subscription Service

A subscription service refers to an online retailer who persuades consumers purchasing on their site to become members.   The retailers do this by offering them a discounted price on an initial purchase if they sign up and become members with the retailers. To make membership more attractive, the retailers also often:

  • Provide bonuses like free shipping only to members; and
  • Give members only access to special offers on products.

The problem is that most consumers who become members believe that membership is free. These retailers inadequately disclose to customers that membership involves paying an ongoing, monthly fee to the retailer – in effect, a subscription. The retailer becomes akin to a subscription service.

This process is the ‘subscription trap’.  Online retailers turn a consumer’s decision to make a single purchase into consent to be signed up to a paid, ongoing subscription service without adequate disclosing that the subscription service involves ongoing fees.  The trap usually happens via the membership mechanism – enticing consumers with a discounted price for their first purchase.

Such retailers avoid full and fair disclosure of the financial implications of becoming a member by making it extremely difficult for consumers to locate the terms and conditions of becoming a member. The information remains at the very end of a long web page or requires a purchaser to follow a protracted set of links to arrive at it. The information itself is often written in very fine print using confusing and complicated terminology.  Nor are the subscription fees insignificant. For example, the subscription fees for online retailer Scootprice’s ‘Premium Membership’ ranged from $29.90 per month to $99.00 every quarter.  Perhaps unsurprisingly, it also becomes difficult for consumers to cancel their membership.

The ACCC can and does take action against such retailers. For example, it recently requested that the US retailer Fabletics change the format of their website after numerous consumer complaints. The ACCC had real concerns that the site did not adequately disclose to consumers the conditions and cost of their VIP Membership Program. As a result, Fabletics now provides clearer information on their website about the fees associated with membership. During check-out, the site also displays this information.

Consumer Law and Subscription Services

Subscription services and the subscription trap are a consumer law issue because the online retailers are misleading consumers. When they fail to disclose adequately the subscription fees associated with membership, they prevent consumers making an informed purchase.  The right of all consumers to be able to make fully informed decisions when buying is integral to consumer law.

The ACCC is not taking issue with the savings and benefits that the retailers maintain come with membership. Depending on the consumer, the savings may be genuine. However, the fact remains that consumers have a right to make an informed decision about whether to become a member. Such a decision is impossible if the retailer does not disclose the costs associated with membership.

Avoiding Online Shopping Traps

The ACCC urges all consumers to be careful when making purchases online. It reminds them that some online retailers:

  • Are not upfront about additional costs like subscription fees;
  • Do not disclose the nature of the subscription service;
  • Do not make the terms and conditions readily accessible and easily readable;
  • Restrict a consumers’ right to cancel an unwanted service;
  • Use pre-checked boxes to make consumers actively opt out  

Consumers also need to be aware that if an online retailer is based overseas, they may not be able to obtain a remedy from them in the event of a problem.

If you would like more information about subscription services or online shopping issues, the ACCC website is an excellent general resource. If you need tailored advice, always speak with a lawyer. Contact LegalVision’s business lawyers to assist you. Questions? Call us on 1300 544 755.

Carole Hemingway

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