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

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 button” must be directly accessible from the entire website. A placement similar to the mandatory provider information page (“imprint”) is advisable, i.e., a prominent place in an omnipresent header or footer, or – where screen real estate is scarce – at the top level of a navigation menu.

Note, importantly, that the “termination button” may not be locked behind a login, but must instead be available on the public website.

The “termination button” form

The form behind the first “termination button” must ask and enable the consumer to enter (i) identifying information on their person and the contract that they intend to terminate, (ii) information as to the type of termination that is sought, (iii) the intended subscription end date, as well as (iv) an address for the provider to send an electronic submission receipt to. What the law explicitly does not say – and therefore does not permit – is to make any particular information mandatory for the submission of the form. Blocking the further progress through the “termination button” interface with a mandatory login at this stage is also not permissible.

Consumers may therefore enter incomplete information in the form, and while they bear the risk that this leads to legally invalid cancellation attempts, the receiving provider will have to review incomplete or unclear statements to determine whether they may be sufficient to identify the consumer and their intent as to which subscription to terminate.

Post-termination processes

The new “termination button” rules state that the provider must send an immediate confirmation of the submission to the address given in the form, and that termination is deemed received by the provider as soon as the form is submitted. It does not set any further rules for what happens after.

This indicates that a cancellation generated through this new interface will have to be treated like any other informal cancellation received, e.g., by email or in the post. Providers will have to interpret the content of the cancellation notice, a task not made any easier by the fact that the new law leaves no room for mandatory fields on the “termination button” form. If (i) it is objectively recognizable or the provider that the subscription that is meant to be cancelled is identifiable, and (ii) the submission was made by a person with the legal power to cancel the subscription, the termination will have legal effect. This also means that there is no legal room for “rejecting” terminations or for first asking for further confirmation, e.g., through second factors by email, text message, or app. If a provider does this – and it may well be a good practice, at least in cases where there is uncertainty, particularly whether the right person submitted the form – it bears the risk of being later found to have falsely assumed that the terminated subscription continued.

Consequences of Non-Compliance

Where a provider fails to correctly implement the “termination button” interface, the new law mandates that consumers may freely terminate their subscriptions without being bound by minimum terms or termination notice periods. Additionally, as a general hazard of conflicts with mandatory consumer protection law in Germany, we expect that non-compliant providers will be exposed to cease and desist claims by competitors as well as by fair competition and consumer protection associations. Providers should also check their terms and conditions for provisions that could be interpreted as denying consumers the use of the “termination button” – come July 1, 2022, such terms will likely be considered unfair terms.

[1] Gesetz für Faire Verbraucherverträge; published in the Federal Gazette (Part I) no. 53/2021, p. 3433 et seq., full text publicly available (in German) at http://www.bgbl.de/xaver/bgbl/start.xav?startbk=Bundesanzeiger_BGBl&jumpTo=bgbl121s3433.pdf.

[2] Other changes under the Fair Consumer Contracts Act include a limitation of automatic subscription term renewals to no more than one month at a time and the outlawing of most provisions in consumer terms & conditions that attempt to hinder the consumer from assigning their claims (e.g. to legal tech services that facilitate efficient mass consumer claims prosecution).

[3] Excerpt from the new sec. 312k para. 1 BGB. Not a literal translation.