Why is it so hard to cancel a subscription or end a “free” trial? Report shows how companies trick you into paying

Many companies are trapping Australian consumers with paid subscriptions by making them difficult to cancel, hiding important details and offering “free” trials that automatically renew for a high fee. We need to reform the law to address this ongoing problem.

A new report shows 75% of Australian consumers have had negative experiences when trying to cancel a subscription, according to the Consumer Policy Research Centre (CPRC).

It shows that companies are using “dark patterns,” models that hamper consumers who are trying to act in their own interests. Subscription traps are often called “Hotel California” techniques, in reference to the Eagles’ famous lyric: “You can leave at any time, but you can never leave.”

In some of these cases, consumers may have remedies under our current consumer law, including in cases of misleading conduct. But we need to reform the law to crack down on other unfair practices.

Meanwhile, CPRC research also provides examples of companies with fairconsumer-friendly subscription practices that also benefit the business.

Examples of Unfair Subscription Traps

Subscription business models have become commonplace: many products are now offered as software, apps or access to a website. In the past, it was a paper book, a newspaper, a CD or a fitness class.

Most people who use online services have experienced the frustration of finding a credit card charged for an unused subscription or spending an inordinate amount of time trying to cancel a subscription.

Companies can make it difficult for consumers to stop paying for unwanted subscriptions. Some do this by allowing consumers to sign up for a subscription with a single click, but creating multiple hurdles if they want to end the subscription.

This can include hiding cancellation options in the app, requiring consumers to call during business hours, or requiring them to go through multiple steps and offers before canceling. The report highlights that many last-minute discounts offered in this process are short-lived. One survey respondent said:

I couldn’t cancel without having to call and speak to someone. Their business hours meant I had to call during my work day and it took a while to get actioned.

Other companies harass consumers with frequent emails or messages after cancellation. One respondent said one company made “the cancellation process impossible by requiring you to call and then assess the reason for your cancellation.”

What does consumer law say?

Some subscription traps already breach Australian consumer law and warrant investigation by the Australian Competition and Consumer Commission (ACCC). Consumers may have recourse where the business has engaged in misleading conduct or imposed an unfair contract term.

For example, the ACCC is suing dating site eHarmony over its allegedly misleading subscription practices.

In the United States, the Federal Trade Commission has filed a complaint against software company Adobe for allegedly using “dark patterns” in its subscription practices.

The Federal Trade Commission alleged that Adobe pushed consumers toward the “annual pay monthly” subscription without adequately disclosing that canceling the plan within the first year could cost hundreds of dollars.

Adobe issued a statement saying the Commission’s complaint “mischaracterizes” its business. The litigation is ongoing.

We need a ban on unfair practices

Some subscription traps do not fall under current consumer law because they do not meet the criteria of misleading conduct or unfair contract terms, but make them practically very difficult to cancel.

The ACCC has called for Australia to follow the lead of other countries such as the UK and the US in enacting a ban on unfair practices to combat this type of behaviour.

Better practices also benefit businesses

The CPRC report also found that 90% of Australians would be likely to purchase from the same organisation again if the process of cancelling a subscription was quick and simple.

Companies that focus on short-term money recovery fail to realize that consumers may cancel their order, but return later if they are treated well.

The CPRC highlights companies that are doing good work. For example, the habit-changing app Atoms (based on James Clear’s book Atomic Habits) offers a truly free trial. It doesn’t require credit card information, doesn’t renew automatically, and lets consumers know how many days of the trial are left.

The CPRC says the charity World Vision does not automatically renew annual sponsorships, but reminds supporters when the sponsorship will expire.

It is important to note that some companies, such as Netflix, are using their data wisely in this context. They notice that users are paying for the service without using it and help them unsubscribe.

These practices deserve to be commended. But we must prohibit unfair practices for companies that do not follow this path and do not recognize the long-term benefits of treating customers fairly.