Implications for charities of the Digital Markets, Competition and Consumers Act 2024  

Changes being introduced by the Digital Markets, Competition and Consumers Act 2024 (the DMCCA) to promote enhanced transparency, fairness and consumer confidence, could place additional obligations on certain charities. 

Large membership charities which have subscription-type arrangements in place with their membership could fall within the provisions of the DMCCA dealing with so-called “subscription contracts” (Part 4, Chapter 2 of the DMCCA). Given the new enforcement powers available to the Competition and Markets Authority (CMA) under the DMCCA, it is critical that charities comply with the new law, or they could face very heavy fines.  

Whilst the DMCCA received the Royal Assent in May 2024, it is not yet fully in force. The provisions dealing with subscription contracts are not due to come into force until Spring 2026, giving charities some time to get to grips with any changes required of them. 

What is a subscription contract? 

The DMCCA’s provisions relating to subscription contracts aim to address the difficulties consumers sometimes experience in exiting contracts and avoiding an automatic renewal. 

In general terms, a “subscription contract” is an agreement between a “trader” and a “consumer” under which:  

• the trader makes an automatically recurring, or continuing supply of goods, services or digital content 

• in return for the trader’s supply, the consumer will automatically incur liability (i.e. there will be some form of payment) for each supply, or recurring liabilities for the continuing supply 

• the consumer has a right to bring the contract to an end. 

A charity will satisfy the definition of a “trader” (being a legal person acting for purposes related to its trade, craft or profession) and its members will most likely satisfy the definition of a “consumer” (any person entering into the contract wholly or mainly outside of the individual’s trade, craft, business or profession). 

How could this apply to charities? 

Where a charity charges its members a subscription fee for which they receive a product or a service from the charity, and if the subscription is paid either for an indefinite or fixed period, has auto-renewing features and includes a right for the consumer to bring the contract to an end (meaning that the consumer must take action to stop the contract from continuing beyond the mandatory period, rather than the contract terminating by default), then this will be a “subscription contract” for the purposes of the DMCCA. 

Whilst this is how many charity membership subscriptions operate, it is worth noting that not all charity membership subscriptions will automatically fall within the DMCCA. This is particularly the case for large membership charities with added complexities, such as professional membership bodies or learned societies, and legal advice should be sought at an early stage.  

In addition, charities should be aware that the provision of something (be it an annual newsletter or thank you gift) to a regular donor could also be caught by the provisions of the DMCCA. However, where a charitable donation is given to a charity and the donor does not receive any goods, products or digital content in return, those donations will not meet the definition of subscription contract and, therefore, will not be covered by the DMCCA. 

What must charities do to comply? 

The DMCCA introduces a robust framework designed to make subscription arrangements clearer, fairer, and more user friendly. Set out below are some of the key aspects of the new regime.  

Pre-contract information disclosure 

Before the consumer commits to a subscription, traders must provide certain key pre-contract information including: 

• the nature of the recurring payment obligation (including the frequency and amount of the payments) 

• the duration of the subscription or the terms under which it renews automatically 

• the fact that the contract will continue (or continue for a fixed term) unless the consumer takes steps to bring the contract to an end. 

These details must be provided in a clear, conspicuous manner and should not be hidden within terms and conditions. 

Cooling-off rights 

The DMCCA mandates a 14day cooling-off period (similar to that afforded to consumers entering into “distance” contracts e.g. online purchases). During the cooling-off period, a consumer can cancel the subscription and receive a full refund of any payments made. 

Information notices and reminder requirements 

Subscription contracts must include upfront disclosures (as mentioned above) and ongoing communication. The trader must give: 

• prior notification of upcoming auto-renewals

• clear instructions on how consumers can exit the contract at any point

Straightforward cancellation mechanisms 

The DMCCA requires traders to provide consumers with cancellation procedures which are simple, clearly defined and easily accessible. This includes providing an exit mechanism that does not impose unreasonable hurdles on the consumer, ensuring that they can terminate their subscription (or stop renewing it) without undue delay or complexity.  

Effect of non-compliance 

The DMCCA significantly strengthens the enforcement powers of the CMA, allowing it to impose penalties of up to 10% of global turnover. Charities will not receive any special exemptions and so non-compliance in respect of subscription contracts could result in a charity receiving a substantial fine. 

It is, therefore, critical that charities review their current subscription practices and ensure that all recurring payments made by members are updated in line with the new provisions in the DMCCA. 

Gift Aid and other considerations 

There is considerable concern that an unintended consequence of the new consumer protection measures set out in the DMCCA is that charities will no longer be able to claim Gift Aid on membership subscription payments. This is because a payment to a charity which is refundable or which can be cancelled (for example, during a statutory “cooling-off” period) does not count as a donation for the purposes of Gift Aid (a statutory condition of Gift Aid is that it cannot be subject to a condition of repayment). 

The option for a member to cancel their membership subscription and have it refunded under the new provisions of the DMCCA takes all such payments outside of the Gift Aid regime, potentially resulting in a considerable loss of income to the charity. 

This issue was raised in the House of Lords during the Bill’s passage through Parliament: Lord Vaizey of Didcot mentioned that “numerous charities have contacted me, including very well-known ones such as the National Trust, the Zoological Society of London and the Royal Horticultural Society” expressing their concerns; Lord Etherton stated that Gift Aid represented around 10% of the Royal British Legion’s total membership fee revenue; and Lord Mendoza explained that nearly 40% of English Heritage’s income came from membership income. The loss to these charities of Gift Aid could be significant. 

Despite calls for charitable membership organisations to be included in the list of excluded contracts set out in Schedule 22 to the DMCCA, the Bill was passed without such provision having been made. The DMCAA is, therefore, clearly intended to catch charity subscriptions contracts.  

The previous Government indicated that it intended to amend existing Gift Aid legislation so that charities could continue to claim Gift Aid on membership subscriptions, whilst still complying with the requirements of the DMCCA. Whether that is still the intention of the new Government is unclear. 

The Birketts view 

Spring 2026 (when the new rules relating to subscription contracts are expected to be introduced) might still seem a way off, but it is likely to take some time for charities to get up to speed with the new legislation. 

Charities should start now to: 

• audit existing membership or donor subscription models to identify any contractual relationships which amount to subscription contracts 

• carry out an initial compliance review of the charity’s existing processes with the requirements set out in the DMCCA 

• review CRM platforms and other IT systems to identify if any changes are required to processes and systems 

• if required, start preparing the required pre-contractual disclosures, renewal notices and cancellation procedures 

• seek specialist advice from consumer law and charities specialists, who will be able to guide them through the necessary changes, helping to mitigate risks and maintain donor trust. 

By embracing these changes proactively, charities can not only protect themselves from regulatory penalties but will also reinforce their dedication to transparency and fairness in their relationships with members and supporters.