Click to cancel: subscription traps under fire

It is no surprise in our online world that subscription-based models have become a cornerstone of the consumer marketplace. With a single click, consumers can ‘set and forget’ their streaming services, fitness program or product delivery, while businesses enjoy predictable and recurring revenue.

But this convenience comes at a cost to consumers. Research suggests that three in four Australians experienced a negative outcome when trying to cancel a subscription.[1] Nearly one in three Australians have felt pressured into keeping a subscription they wanted to cancel, with one in ten Australians giving up and continuing to pay for unwanted services.[2] Concerns are mounting around “subscription traps” – practices that make it harder to cancel than it was to sign up. While not yet prohibited under the Australian Consumer Law (ACL), proposed reforms could significantly shift the compliance landscape for businesses relying on subscription models.

How Subscription Traps Work

A subscription trap arises where businesses introduce intentional or unnecessary obstacles into the cancellation process. These can be subtle, such as:

• making it difficult to locate how or where to cancel a subscription;
• requiring customers to provide reasons for cancellation, then presenting persuasive counter-offers to dissuade them, or forcing customers to reconfirm multiple times; or
• using manipulative design elements known as ‘dark patterns’ (such as making the ‘Keep Subscription’ button more prominent than the ‘Cancel’ button).

Other tactics are more overt, including:

• restricting cancellation to a phone call or in-person visit, even where sign-up was online; or
• imposing disproportionate exit fees, even for flexible subscriptions.

From a marketing perspective, these strategies are sophisticated. From a legal perspective, they are teetering on the edge of what is considered lawful.

The Current Position Under the ACL

At present, cancellation processes must comply with general consumer protections under the ACL, in particular:

• section 18 – misleading or deceptive conduct;
• part 2-3 – unfair contract terms; and
• sections 20–22 – unconscionable conduct.

For example, if terms and conditions describe cancellation as being available on an unconditional basis and ‘at any time’,  imposing a mandatory step such as providing a reason for cancellation could be misleading and unfair. Similarly, processes that shame or pressure consumers into staying may raise issues of unconscionability.

However, the ACL does not directly address whether adding obstacles to the cancellation process is itself unfair. This is where the proposed reforms come in.

Proposed Reforms: The Unfair Trading Practices 

Treasury is proposing to introduce a new Unfair Trading Practices regime.[3] This would extend consumer protection beyond existing prohibitions by capturing conduct that is not currently unlawful but is nevertheless harmful to consumers. For a quick refresher on why such reforms have been deemed necessary, see our previous article.

Subscription-traps are one area that has been identified as a priority for reform under the proposed regime. In the subscription context, the Treasury’s guiding principle is simple: it should be no harder to cancel than it was to sign up.

Under the proposed regime, dark patterns and other obstacles in the cancellation process will be prohibited. Further reforms under consideration include requiring active ‘opt-ins’ for ongoing subscriptions, mandatory reminders before auto-renewals and ensuring clear disclosure of pricing, renewal and cancellation terms at sign-up.

International Developments

Australia is not alone in scrutinising subscription practices. There is a clear global trend towards simple, transparent, consumer-friendly cancellation. Businesses with international operations should expect to align compliance across multiple jurisdictions. Australian regulation should not be left behind.

Practical Considerations for Businesses

Although legislation has not yet been introduced to Parliament, businesses should anticipate the upcoming reform and begin preparing now. Practical steps your business could take include:

• review cancellation flows to identify points of friction or persuasion;
• simplify cancellation – ideally one step, on one screen, without last-minute offers or language designed to induce guilt;
• align terms and practices – ensure cancellation processes reflect what is promised in contracts;
• avoid dark patterns – test whether design features disproportionately favour retention;
• provide timely renewal reminders to support informed decision-making; and
• consider cross-jurisdictional obligations where services are offered internationally.

Where to from here?

Australia already has strong consumer protections. The proposed Unfair Trading Practices regime would close remaining gaps, limiting the extent to which businesses can rely on inconvenience, pressure or design strategies to retain customers.

On one hand, these reforms promise to remove tactics that frustrate and disadvantage consumers. On the other, they raise a more difficult policy question: when does legitimate marketing become unlawful manipulation? Is requiring a reason for cancellation genuinely unfair, or merely inconvenient? Should businesses lose the ability to persuade customers at the very moment they are most likely to leave?

Ultimately, wherever the line is drawn, the balance between consumer rights and business flexibility is shifting. The message for businesses is clear: compliance isn’t just about legal risk – it’s about meeting evolving standards of fairness. After all, great businesses build trust by respecting their customers – even when they choose to walk away.