If you offer a subscription service, make sure your renewal and cancellation terms are transparent.
Like most people in 2017, I’m a big fan of Spotify and Netflix. While subscription-based business models aren’t a new thing, they have certainly soared in popularity in recent years. Many start-ups and existing businesses are hopping on the subscription-model bandwagon, offering subscription boxes containing their products, or samples, as an effective way to get ongoing revenue. I love reading about the new and innovative subscriptions that you can buy or gift to someone: fruit, organic fruit, sugar free, gluten free, mystery boxes, beauty, beer, love, sailing, dogs, cats, cooking, wine, the list can go on for pages!
However, it is important that businesses utilising these models are transparent about their prices. The ACCC has recently accepted a court enforceable undertaking against Sensis Pty Ltd (Sensis), which offers a subscription service to provide Yellow and White Pages on a monthly fee, with a 12-month minimum term.
The service automatically renewed for a further 12 months unless the customer cancelled, and the customer may be charged a cancellation fee for cancelling an automatically renewed contract after a certain date. These renewal and cancellation terms were not adequately disclosed to customers before and after the contracts were entered.
Sensis agreed to amend their product terms by:
- Making their automatic renewal terms more transparent;
- Including an obligation to remind customers of their pending automatic contract renewal.
If you have a subscription model, it is a good idea to include similar terms to ensure that your automatic renewal process is not misleading or deceptive under the Australian Consumer Law.
Additionally, the ACCC was concerned that the subscription contract may be ‘unfair’ under the new business-to-business unfair terms provisions, as Sensis had a discretion to cancel and terminate a customer contract without cause. In response, Sensis amended this term so that Sensis would only have a right to terminate in circumstances where Sensis is “acting reasonably” and in order to protect its legitimate interests.
I’ve worked with many businesses in reviewing or drafting their contracts. With my in-depth experience in retail and commercial law, I work closely with clients to provide high quality legal work. If you would like to get in touch about your contracts, contact me at or call me at 1300 033 934 for a no-obligation quote.