How Merchants Will Fight Subscription Dodgers

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Many product and service providers entrap consumers in subscriptions that they no longer need or want.

The Rogue’s Gallery of shady merchants includes some of the largest and most valuable companies on the planet, as we saw in What Is Subscription Trap?.

We looked at some best practices to escape subscription trap in Six Hacks To Escape Subscription Trap.

In Will Regulation Eliminate Subscription Trap?, I gave a heads-up on the regulation in the pipeline aimed at curbing subscription trap. This included Reg Subscription Management in India and rules against dark patterns in California. Since I published that post, the Indian regulator has postponed Reg SM by six months and the US Federal Government has introduced the catchily titled “UNSUBSCRIBE Act” to regulate subscriptions.

I was about to conclude my writings on this topic when I recalled the following questions discussed regularly on social networks:

They told me that there are many naive, misinformed or entitled people out there who could use the aforementioned hacks and regulations to dodge subscription payments arbitrarily. By doing that, they would be reneging the contracts that they signed up for.

In this fourth and concluding part, I’ll predict how aggrieved merchants might respond to subscription dodgers.

Fulfillment of contractual obligations is the bedrock of business. Courts have regularly ruled on the sanctity of contracts.

It’s not conducive to the welfare of merchants to let customers wriggle out of subscriptions via side provisions and thereby breach contracts.

Let me speculate on what they might do to prevent this from happening.

So far, we’ve made the implicit assumption that a subscriber is eligible to cancel the subscription whenever they wish to cancel it. On that basis, we’ve concluded that, by using dark patterns to prevent cancellation, merchants are behaving in a deceptive and unlawful manner.

We’ve seen several instances of subscription traps in Part 1. For ready reference, let me take the following one:

Free Trial

You get a free trial for a product / service for one month, with the condition that it will automatically be upgraded to a paid subscription unless you cancel it before the end of the month. You try to cancel the subscription on Day 28 but the merchant’s website locks you out. At the beginning of the second month, the merchant upgrades you to the paid subscription and bills you under the pretext that you failed to cancel the free trial before it ended.

The consumer is clearly eligible to cancel the subscription in this specific case (and, by not letting her do it, the merchant has set a subscription trap.)

But eligibility cannot be taken for granted in general.

This blog does not provide legal advice but eligibility or non-eligibility to cancel a subscription is determined by whether it is open-ended or closed-ended; has a lock-in period or not; is annual, basis monthly payments, or monthly on auto-renewal basis; and so on.

To amplify this, let’s take the following example of a subscription with two plans:

Monthly Plan: $35 / INR 2625 per month for monthly subscription, payable on monthly basis, auto-renewed unless cancelled.Annual Plan: $25 / INR 1875 per month for annual subscription, payable on monthy basis, non-renewable.

This pricing structure is fairly popular in Media, OTT and SAAS industries.

In both plans, subscribers pay on a monthly basis. But there’s a difference:

  • In the monthly plan, they pay full price, don’t commit beyond a month but need to cancel the subscription before the end of the month so that it does auto-renew for the next month.
  • In the annual plan, they commit for a full year and, in return for their long term commitment, receive an attractive discount of $10 / INR 750 per month.

Let’s say a shady subscriber signs up for Annual Plan to avail herself of the discounted rate (or whatever) and feels like cancelling the subscription after three months out of whim (or whatever).

The reason is not important. Since she signed a contract for a 12 month period, she has to pay for 12 months. In other words, she’s not eligible to cancel the subscription after three months. The merchant does NOT have to provide a cancel button until the end of the twelfth month. There’s no Subscription Trap if he does not. (Even if there are force majeure-based waivers for the 12 months’ commitment, there’s no subscription trap since merchants are not obliged to cover every exception in their standard order placement / cancellation journey.)

Now suppose this subscriber exercises the provision under Reg Subscription Management or uses one of the hacks given in Part 2 to stop payments after three months – just because she can.

In short, she has dodged the subscription and has thus breached the contract.

It’s like taking a loan to be repaid with 12 EMIs and cancelling the direct debit mandate for repayments at the end of the third month. That’s a default, plain and simple. In Let Banks Chase Their Defaulters Instead Of Seeking Bailouts, I suggested that banks should be free to harrass such defaulters to the full extent of the law.

Likewise, merchants should be free to go after subscribers who use shady tactics to escape from subscriptions.

I expect them to take one or more of the following actions against subscription dodgers:

  1. Recover the annual subscription discount from the dodger.  In the above example, this would work out to $10 / INR 750 * 3 months = $30 / INR 2250.
  2. Sue the shady subscriber for breach of contract, mail monthly bills to her home address and business address, and feel free to send a recovery agent to her home or office to collect the outstanding amount, as I warned the Quora OP here.
  3. Tell all subscribers to pay full year’s fees upfront, thus ruling out the possibility of subscription dodging by anyone.

To merchants who are listening, I strongly advocate #1 since it directs the punishment to the errant subscribers – and no one else. While it’s a bit harsh, I’m also okay with #2 for the same reason. (For the uninitiated, Mobile Network Operators follow this practice in markets like USA, UK and Germany where they give customers a free handset in return for cellular contracts of 18-24 months and the customer scoots after a few months.)

By taking punitive action on everyone for the evils of the few, #3 is like throwing the baby out with the bathwater. Besides, it would mean retreating from the modern Subscription Economy and going back to the old Upfront Payment Economy. Therefore, I strongly recommend against this option.