Click to cancel: How hard should it be to end a subscription?

We all know how annoying it can be to cancel a subscription, whether to a streaming service or gym membership, but when do ‘'subscription traps’', as they’re known, legally cross a line?

Consumer advocates, businesses and legislators are puzzling over the question as the government formulates new laws on unfair trading practices.

Today, national consumer affairs reporter Elias Visontay on what a ban on subscription traps may actually look like.

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Episode Transcript

S1 (00:01):
From the newsrooms of the Sydney Morning Herald and The Age.
This is the morning edition. I'm Julia Kerr Katzel, filling
in for Samantha Sellinger Morris. It's October 1st. We all
know how annoying it can be to cancel a subscription,
whether to a streaming service or gym membership. But when

(00:23):
do so-called subscription traps cross a line? Consumer advocates, businesses
and legislators are puzzling over the question as the government
formulates new laws on unfair trading practices. Today, national consumer
affairs reporter Elias Visconte on what a ban on subscription

(00:46):
traps may actually look like. So, Elias, I'm sure many
of us, myself included, will understand that very real and
unique pain of receiving yet another invoice from yet another

(01:06):
streaming platform that we thought we'd cancelled. But you've been
looking into how much of a problem this really is,
and how much of a business this is keeping the
customer captive. So can you tell us what you've learnt?

S2 (01:21):
Yeah. Look, I think it's, um. It's such an interesting topic.
I think it's good to kind of define what we're
talking about when we say the word subscription trap. And
it's basically anything that a business might throw at you
that is designed to manipulate or trick you or push
you into a certain behaviour. And here it's about not
cancelling on them. And the reason that is, is because

(01:44):
so many businesses now in the online economy, whether they're gyms,
whether they're meal subscription services, subscriptions are the business model.
This is their bottom line. So there's there's so much
incentive here to keep you as a customer. So say um,
you signed up for Netflix because you wanted to watch Seinfeld,

(02:05):
which I think they do get a lot of people
signing up for. Then you binge the season, binge the
whole series, and you're ready to cancel. It's basically anything
that you might find gets in the way or makes
it difficult to cancel. So this could be making it
really difficult to find the button and the page that
actually allows you to cancel. It could be forcing you

(02:27):
to call a phone number, a real live hotline to cancel,
which is, you know, quite a step means you have
to take time out. There could be a a hold
on the line. It could take you hours to actually
get through to someone to do it. Subscription traps can
also be not that straightforward. So it could be a
several step website. You know, it could make you go

(02:49):
through a whole range of different pages before you actually cancel.
And throughout that, it could include maybe offering you a
discount on your existing subscription as a way to to
keep you from leaving. Or it could actually be something
that guilts you into staying. There's actually a term for this.
It's called confirm shaming. And between all of those various

(03:09):
hurdles that businesses are using, what's emerged is actually a
pretty big cost to Australians on average each year.

S1 (03:19):
Mm. So tell me about what some of the data
is showing us what the numbers are saying.

S2 (03:23):
So it's obviously important to say from the get go here,
it's really difficult to to measure this as a phenomenon.
Not only is it new and growing a lot with
the online economy, but it's difficult to know exactly what
people's intentions are. Sometimes it might be that they've forgotten
about something they've signed up to. Sometimes they might be
on the fence about it. No one's actually telling anyone

(03:45):
who's surveying this. I wanted to get out of this.
I got trapped in this, or I subscribed to Netflix,
and I really like it. But there is some interesting
research from ING, which was put out in 2023 that
found the average Australian could save about $1,261 a year
by cancelling subscriptions and regular payments that they'd forgotten about
or don't even use. There's also some data from the

(04:08):
Consumer Policy Research Center. They've made a more modest calculation
of about $50 per person per year, on average across
the country that it's costing us. But still, you know,
if you go on that more modest estimate, this is
costing Australians up to half $1 billion a year just
on subscriptions we don't need or want. Aside from those

(04:29):
financial stats, there's also been some surveys that have found
that three quarters of Australians with subscriptions have had a
negative experience when trying to cancel, with 1 in 3
saying they felt pressured into staying on. And it's actually
found that 1 in 10 Australians have just given up
trying to cancel a subscription, meaning they're just resigned to

(04:50):
pay this perpetually, even though they don't want it.

S1 (04:52):
And I think that's really what these businesses are relying on, right.
These customers who would rather maybe continue paying than having
to navigate ten different steps or making a phone call
during business hours or, you know, even just those time
poor people who don't have the time for that.

S2 (05:07):
I think it's it makes sense. Right? And especially with
this online economy, people are signing up for things that
might be $0.99 a month or $1 something a month,
and it's easy to forget about them. It's easy to
not care if you get the notification that pops up.
You spent $0.99. When you're at the supermarket spending 100 bucks,
it's easy to forget about it. But what I think

(05:28):
those financial insights found is that it's really starting to
add up when you when you factor in everything that
you're signing up for.

S1 (05:37):
And then some change their subscription model and up the
price or double the price or something like that and
just slip that in and then you're paying way more
than you thought you would. And so I guess the
part that really interests me is that you say that
some felt pressured into staying on, which makes me wonder
about the psychological tactics behind some of these traps, which
we can see in other methods, like drip pricing, for instance.

(06:00):
So can you tell me about some of those and
maybe some of the horror stories you've heard from people?

S2 (06:05):
Yes. I think, um, increasingly companies really are trying to
pull at the heartstrings and, you know, play on guilt
and some of those psychological cues to get you to stay.
Confirm shaming is a really interesting one. And in reporting
this story, and as being a consumer affairs reporter, I've
I've certainly heard some wild stories. One of them that
stands out was a software company that relied on subscriptions

(06:28):
for access to its to its apps. And when someone
tried to cancel, not only did they have that whole
kind of ten point slide that they had to go
through that presentation to cancel it explained to the customer
just how tight their financial situation was, how much they
relied on subscriptions like yours. And one of the final

(06:48):
pages before canceling was a picture of their of their staff,
all of their staff members. And they said, please pick
a face. Please choose an employee that we should fire
as a result of you canceling your subscription. So you
can really see just how desperate some companies are to
to keep you there.

S1 (07:06):
That's so shocking. I don't know how I'd feel. I
think I would be guilted into continuing to pay for
a service like that, but also astonished at that method.

S2 (07:14):
Yeah, I think that's certainly one way of trying to
keep customers. I guess the flip side of this is
that some of that data that we talked about from
the consumer advocates and the bank shows actually, that businesses
that do make it easier to cancel, they actually do
quite a lot in terms of building trust with their customers.
And people report that if it's easy to cancel, they're

(07:37):
more likely to sign up again if something does tempt them.

S1 (07:40):
And you also spoke to an economics professor, Elias, who
said that these techniques of keeping the customer captive, they
kind of create this other effect on the market. So
not only are they compromising their own reputation, but there's
a domino effect on the market itself. So what exactly
was he talking about there?

S2 (07:59):
Yeah. So I think it's really interesting to look at
subscription traps through the lens of behavioral economics. I spoke
to Professor David P Byrne, who's the deputy head of
Melbourne University's economics department, and what he said was that
he views subscription traps as something called sludge. So in economics,
businesses often use the term nudge to describe something that

(08:21):
they might set up that they want to push consumers towards.
Governments can also create nudges. It could be something like
pushing people towards getting private health insurance by penalizing them
if they don't. Or it can be an incentive like
a discount. David Byrne sees subscription traps as sludge, the
opposite of a nudge. Basically sand or making it really difficult,

(08:43):
you know, to push through and get somewhere. Now he
actually views subscription traps in a pretty sinister way. When
he looks at how the market operates, he basically says
they distort, you know, how a true free market should
work because consumers don't have that choice. They don't have
the ability to easily switch between different providers of a
service based on, you know, price innovations. And he actually

(09:07):
thinks the more that subscription traps are laid and that
they exist and nothing is done to challenge them and
remove them, we're actually leading to a pretty poor offering
for consumers across the board. If businesses have you captive,
there's less incentive for them to be more competitive on
price or to improve what they're actually offering and bring new,

(09:29):
whether that's technology to you, whether that's bring new shows
to your streaming platform, new equipment to your gym, a
whole range of things.

S1 (09:37):
And I think that reputational damage is a big part
of it because, you know, speaking personally, I'm more likely
to sign up for a streaming service again and again
and again. Each time there's a new show I want
to watch than some other service that's going to take
ten steps and a phone call during business hours. I'm
just not going to use that service. So yeah, you'd
probably see more returning customers if you've got ease of use.

S2 (09:59):
Exactly. And and some of that research that we mentioned
earlier about the cost of subscription traps that also surveyed
customers and that found that people are so much more
willing to return to a business that made it easier
to cancel. But I think really interestingly, is that that
choice between making it easy or making it difficult is
something that businesses have to weigh up. And increasingly, it's

(10:21):
actually looking like it can just make good business sense
to keep people captive and make it really difficult, even
if you're going to be sabotaging the potential for them
to come back if they do manage to escape. That
economics professor David Byrne said the fact that subscription traps
still exist is just proof that they are extremely lucrative.

S1 (10:44):
We'll be right back. So I guess when we talk
about the ethics of these subscription traps, what's the legality
around practices like this?

S2 (10:57):
Yeah, it's a really interesting one. So the reality is
that subscription traps actually kind of fall into this gap
in the consumer law. You know, I spoke to the
director of campaigns at choice, the consumer advocacy group Rosie Thomas,
and she said that the law currently says you can't
mislead or act unconscionably. But that's a high bar, and

(11:19):
it's not exactly clear if a lot of these subscription
practices quite meet that. And the way the law works
is if if it's not clear cut in that way,
it's just going to be able to continue to flourish.
That's what Choices View is. And a lot of people,
they might be signing up for a gym membership and
they're agreeing to these terms. Or they might be, you know,

(11:40):
people are existing customers. They're entering into these contracts. So
it's a bit murky, and the law doesn't really come
down on one side or the other saying yes or no.
And in the absence of that, consumer groups at least
say that it's just allowing subscription traps to flourish and
to be part of, I guess, the online business model.

S1 (11:57):
And so consumer advocates are calling on the federal government
to legislate stricter rules around this, though, and crack down
on subscription traps. So what's in the works at the moment?

S2 (12:08):
So the Albanese government has actually been talking about these
subscription traps for a while now, and they've been listening
to what has become a growing chorus of consumer groups really,
really pushing for change. The way it's being discussed is
as one of what people are calling dark patterns employed
by businesses that they want to see deemed unfair and outlawed.

(12:31):
So an example of a dark pattern that isn't just
a subscription trap is something like drip pricing, where a
consumer might be advertised. This is the total cost of something,
but once they make it through to the checkout stage, fees,
delivery is all added on and the cost is actually
much greater. So a bunch of different consumer groups have
written to the government, to the Assistant treasurer, Andrew Leigh,

(12:54):
who's been taking carriage of this. They've been calling for
urgent action. Some of those consumer groups have looked to
what's in place overseas. And there's two examples that I
think are really interesting and could form, you know, a
large part of what we ultimately bring in here. So
in the United States. There was a proposal to have

(13:15):
what they called click to cancel rules, which said that
it had to be as easy to terminate a subscription
as it was to sign up. But in the United Kingdom,
they also have laws around this too. And they're in
place right now. And there it states that businesses must
make it straightforward to cancel without having to take any
steps which are not reasonably necessary to end a subscription.

(13:37):
Those laws also require a 14 day cooling off period
for subscriptions you might take out, or whenever a subscription renews.
So you do have 14 days if you've forgot about
it to then cancel. But the path to making a
law is a long one, and in Australia, it's actually
been out for feedback from the industry as to what

(13:58):
our laws should look like. And there's been a bit
of pushback already to some of those really simple click
to cancel rules.

S1 (14:05):
And as you've written in your piece, you know, legislation
around this is tricky. You have to balance consumer rights,
business interests and existing laws. So what are some of
the issues that have come up when you start to
limit these practices?

S2 (14:20):
Yeah, so obviously if you're a consumer, you just want
it to be super simple. If you want to cancel,
it should be as easy as clicking a button. But
some businesses argue that it's actually pretty tricky for them
if you're able to cancel that quickly. So the digital
industry group has made the case that businesses should still
be able to offer you a discount before you confirm

(14:41):
a cancellation. And it's warned that by making it too
easy to cancel, consumers might start trying to game that
that model where you sign up for a free trial
or for a great offer, you terminate it purely to
re sign up for an offer that's intended for new subscribers.

(15:04):
There's also some really interesting arguments made by people like HelloFresh,
Marley Spoon and some other meal delivery kit brands. They've
said that confidence and subscriber numbers is like a key
part of their business model, and their supply chains of
perishable food really rely on some of that certainty. You know,
I think there was a really interesting point made by

(15:25):
the Chamber of Commerce and Industry that said, it's probably
going to be really tough to offer something like one
click cancellations or forced businesses into offering that, because ultimately
a subscription is a formal contract and legally, you may
not be able to just click unsubscribe at the bottom
of an email and be done with it. You know,

(15:46):
I think what's clear from the whole feedback process the
government has been doing on this is that any unfair
trading prohibitions that they bring in, any, any move to
kind of outlaw subscription traps, are really going to have
to balance consumer rights with business interests and the way
that people operate.

S1 (16:07):
Well, hopefully we can see some positive legislation that both
satisfies consumers and businesses and we can all walk away happy.
Thank you so much for your time today, Elias.

S2 (16:20):
Thanks for having me.

S1 (16:26):
Today's episode of The Morning Edition was produced by Josh towers.
Our executive producer is Tammy Mills. Tom Mackendrick is our
head of audio. To listen to our episodes as soon
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(16:54):
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