What does this mean for retailers?
Retailers should review the entire customer journey—from the first advertisement through to sign-up, renewal and cancellation.
Consider whether:
customers understand that they are entering a subscription;
the amounts and frequency of payments are clear;
renewal arrangements are properly explained; and
cancelling is as easy as signing up.
Watchdog tip: Review the entire subscription experience, not only the terms and conditions.
Why has the law changed?
The reforms respond to concerns about:
unclear ongoing payment obligations;
automatic renewals;
difficult cancellation processes; and
free trials or introductory offers that automatically convert into paid subscriptions.
The aim is to ensure customers understand what they are agreeing to and can easily end an arrangement they no longer want.
What is a subscription contract?
The new rules cover several types of arrangements that continue automatically unless the customer takes action to stop them. This includes an ongoing subscription with no fixed end date, such as a gym membership that continues until the customer cancels.
It also includes a fixed-term subscription that renews automatically. For example, a 12-month subscription may begin another 12-month term unless the customer cancels before the renewal date. Free trials that automatically convert into paid subscriptions are also covered. This may include a 30-day free trial that becomes a paid membership unless it is cancelled.
The rules can also apply to introductory offers that continue at a higher price. For example, a subscription may cost $20 for the first month and then automatically continue at $80 per month.
Watchdog tip: Review every recurring payment arrangement, not only products described as a “subscription” or “membership”.
Some contracts are not covered
The new rules generally do not cover a fixed-term contract that simply gives the customer the option to renew and requires the customer to take positive action to do so.
The rules are directed at contracts that continue automatically unless someone takes action to stop them. Certain subscription contracts are also specifically excluded by the legislation.
Watchdog tip: Automatic continuation is a key feature of most subscription contracts covered by the new rules. If customers must take an active step to renew, the new subscription rules will generally not apply. Other Australian Consumer Law requirements may still apply.
The rules also protect many small businesses
The reforms also apply to many standard-form subscription contracts entered into with small businesses.
For these purposes, a small business is one that:
What information must be disclosed?
Before a customer enters a subscription contract, the business must prominently disclose prescribed information, including:
that the arrangement is a subscription contract;
the amounts the customer will be required to pay;
the contract period;
how the subscription will renew;
any notice required to cancel; and
how the customer can cancel.
How must the information be presented?
The required information must be presented prominently and clearly. It must appear immediately before, or close to, the point at which the customer agrees to enter the contract.
Customers should not need to search through lengthy terms and conditions to understand the key features of the subscription.
Watchdog tip:If customers must read lengthy terms to understand the subscription, review your sign-up process. The key terms should be clearly explained and brought to the customer’s attention before they agree.
Ending a subscription contract
Businesses must provide a cancellation process that is easy to find and straightforward to use. If customers can sign up online, they must also be able to cancel online. Businesses should avoid unnecessary steps or other barriers that make cancellation more difficult than sign-up.
Watchdog tip: Compare the cancellation process with the sign-up process. Only require the steps reasonably necessary to end the contract.
Future notification requirements
Additional notification obligations may be introduced through future regulations.
Businesses should continue to monitor developments as the commencement date approaches.
Walk through the complete subscription journey
One of the best ways to prepare is to complete the subscription process exactly as a customer would. Start with the advertising, continue through sign-up and renewal, and finish by testing the cancellation process.
Ask:
Does the advertising make it clear that the customer is entering a subscription?
Are the recurring fees and payment frequency easy to understand?
Is automatic renewal explained before the customer signs up?
Can the customer easily find the cancellation option?
Is cancelling no more difficult than signing up?
Watchdog tip: Ask someone unfamiliar with the subscription process to test it from beginning to end. Fresh eyes often identify issues that internal teams overlook.
Five practical compliance tips
Identify all recurring payment products
Do not assume that only products called “subscriptions” are covered.
Review customer disclosures
Ensure the key information is clear and prominent before the customer signs up.
Test the cancellation process
Confirm that cancellation is simple and available through the same channel used to subscribe.
Monitor further regulations
Additional notification requirements may still be introduced.
Train relevant teams
Ensure marketing, digital, customer service and legal teams understand the new requirements.
Final thoughts
Businesses that review their subscription journeys now will be better prepared when the reforms commence on 1 July 2027. Early planning should reduce the need for last-minute changes while also helping businesses provide a clearer and more positive customer experience.
How Watchdog Compliance can help
Watchdog Compliance can review subscription offers, websites, apps, cancellation journeys and customer communications to help businesses prepare for the new requirements.
