New “Two-Click Cancellation” Button – German Exceptionalism for Subscription Terminations

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As part of the new Fair Consumer Contracts Act,[1] Germany will soon require specific cancellation/termination mechanisms for consumer subscriptions. These mechanisms come on top of the updated EU-wide consumer contract rules under the EU Directives on Contracts for Digital Services and Content and on Contracts for the Consumer Sale of Goods and will take effect on July 1, 2022. Significant implementation effort is expected for affected providers.

Businesses offering subscriptions to German consumers will have to provide a specifically labeled button for their online retail channels that leads to a contact form through which consumers must be enabled to cancel existing subscriptions with the click of only one further button. If sufficient data to identify the subscription to be cancelled is entered by the consumer, the submission of the form will itself be a valid cancellation, the effect of which cannot be made subject to further steps such as logins or second factor (e.g., email, app) confirmations.

Failing to implement this “cancellation button” or “termination button” correctly will invalidate any minimum subscription terms or termination notice periods in contracts for which such button should have been provided and will be a breach of consumer protection that opens providers to cease and desist claims.

The “Termination Button”

The requirement for a “termination button” and the associated two-click cancellation interfaces is the most demanding for providers to implement among the small collection of purely national (as opposed to EU-driven) changes brought to German consumer law by the Fair Consumer Contracts Act.[2] The core concept behind the “termination button” is simple: subscriptions that consumers can start with a few clicks online should be just as easy to cancel.

To achieve this aim, the German legislators have mandated that:

  • Certain online channels through which consumers can enter into subscriptions will have to prominently feature an omnipresent button labeled “Terminate contracts here” (Verträge hier kündigen).
  • Operating the “Terminate contracts here” button must lead directly to a form where the consumer can enter (i) identifying information on the person of the consumer and the contract that they intend to terminate (e.g., consumer name, contract/customer number etc.), (ii) information as to the type of termination that is sought (i.e., for cause or for convenience), (iii) an intended subscription end date, as well as (iv) an address for the provider to send an electronic submission receipt to.
  • The page with the aforementioned form must contain a second button labeled “terminate now” (jetzt kündigen). Operating this button must directly submit the form content.
  • Provided that sufficient data was entered, the submission will be a valid termination, which cannot be made dependent on further steps such as logins or second factor (e.g., email, app) confirmations.
  • The provider will also have to immediately confirm the submission electronically to the address provided for such confirmation in the form.

The “termination button” requirement will be added to the German Civil Code (BGB) as a new sec. 312k, taking full effect for new and existing consumer subscriptions without any further transition period on July 1, 2022. The button will also have to be present on platforms and marketplaces where consumers can directly conclude subscriptions with third party providers, and enable the cancellation of such subscriptions through the platform. The button will not be required for financial services, or for contracts where terminations legally require a special form, such as a qualified electronic signature (QES).

Scope of the “Termination Button” Requirement

The new law describes the channels in which the “termination button” has to be implemented as follows:

Where consumers are able to conclude an electronic commerce contract for the ongoing supply of goods or services in return for payment, through a website […].[3]

This scope is further broadened due to a history of expansive interpretation of several of its key terms.

Website

Firstly, it is not certain how far the term “website,” for which no legal definition exists under German law, extends. The technical scope of the term “website” may be broader than what one might expect. In that regard, it will hardly be controversial that “websites” will include traditional web shops made for desktop browser access as well as those made or optimized for other platforms (e.g., mobile, tablet, etc.).

However, there is also little argument why web-wrapper apps – basically mobile websites used through a separate browser instance masquerading as a native app – should be excluded from this scope. Beyond that, there is concern that “websites” may extend even farther, seeing that the same term, as used in similar contexts in existing German consumer law, has also been interpreted to include shops implemented, e.g., through native apps. If subscriptions offered through native apps are caught in the scope of the “termination button” requirements, the same logic may well end up being applied to subscription functionalities that are integrated with a device’s core UI and OS functionalities (e.g., e-reader shops, smart TV shops, virtual assistants, etc.).

Where consumers are able to conclude an electronic commerce contract

While the “termination button” requirement is limited to websites where consumers can enter into subscriptions (using the well-established, EU-based German definition of a consumer as a natural person that acts for purposes other than their business, trade, craft, or profession), and B2B websites and subscription contracts are therefore out of scope, this is not as clear a limitation as it may at first seem.

Firstly note that for existing law with a similar scope of “websites for electronic commerce with consumers,” the courts have held that an online shop must be fully closed to consumers in order to steer clear. This means that so long as it is not clearly excluded that consumers are among its users, a primarily B2B website may still need a “termination button.” Mere labels such as “Shop for B2B customers” or just asking customers to confirm that they are not consumers are likely not sufficient to avoid the new rule’s application.

Secondly, once a website has a “termination button” – for example because it also has consumers among its customers, see above – while the new law does not require that business customers be given the opportunity to use such button for their terminations, it also does not contain anything that would bar them from using it. This would have to be done by the provider’s business terms.

In return for payment

Last but not least, the seemingly clear limitation that the termination button only applies where businesses provide their goods or services “in return for payment” (entgeltlich) does not provide the safe haven for free services that it may appear to.

Arguably, some “free” services are not truly free but have simply been prepaid with the purchase of digital content or hardware devices – e.g., the “free” provision of online gaming servers after a one-time purchase of a video game license, or the “free” provision of connected services for a hardware device with functionalities that depend on them. Beyond such examples of services in relation with which monetary payments were actually made, the understanding of “payment” in German (and EU-wide) consumer law has moved towards the general recognition that the provision of personal data by a consumer can be a type of payment, at least if the use of such data by the recipient is not limited to what is necessary to render the relevant services.

As a result, there is a risk that a “termination button” will be required even in some cases where the only contracts that consumers enter into are the terms of service for “free” services, including the terms of service for the use of connected apps, connected devices etc.

Implementing the “Termination Button” Requirement

Where a need to implement the “termination button” is identified, the detailed requirements set for its implementation are likely to confront providers with several additional challenges.

Positioning of the “termination button”

The “termination…

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