Online Subscriptions That Trap You
The rush to subscription business models has revolutionized the software and product markets. But it has led to varying degrees of misconduct by many firms. You can measure the ethics of a subscription firm by how it handles two key steps.
Today, instead of buying Quicken or Microsoft Office or Adobe Pro, you are urged to “subscribe” to an annual license to use the software. Often you are urged to do this to take advantage of a free or discounted “trial period.”
Nothing shows the ethics of a subscription business more clearly than how it handles two essential steps in this subscription process. Unfortunately, unscrupulous companies take advantage of consumers at precisely these two steps: 1) signing you up for a subscription you don’t understand; 2) making it difficult – if not impossible -- to cancel a subscription once it has started.
Last week the Federal Trade Commission made an example of one software subscription business, ABCmouse.com Early Learning Academy, and its parent, Age of Learning, for gross misconduct. Between 2015 and 2018 Age of Learning offered a $59.95 special 12 month subscription to ABCmouse for learning materials for children ages 2-8. The company used a “negative option” offer, which automatically billed consumers for a regular subscription after a trial period at the discounted price. There is debate whether the consumer could understand the huge jump in charges from the initial disclosure, but a large number of buyers of ABCmouse were charged up to $90 per month after the 12 month promotional period.
The company compounded its misconduct by making it almost impossible to cancel the subscription, refusing to accept cancellations over the phone, via email, or through a form on its website. Instead, it required consumers to go to an inconspicuous portal on the website and navigate from six to nine screens to cancel.
The FTC action was timely. During the pandemic, many more parents are seeking educational services online and online commerce in general has been booming. Many companies are promoting subscriptions.
I have just been through the subscription process with the Financial Times. A $1 four week trial subscription attracted me. I felt they disclosed in considerable detail that a monthly subscription would cost $67 and up after the trial period. Further, I actually received an FT email 7 days before the end of the $1 trial, reiterating that I would shortly be paying more. There was even a link if I wanted to cancel. I was amused that the subscription was not fully cancelled until I assured them three times that I really really really did want to cancel, but the process was transparent and easy.
Check your credit cards and bank statement regularly to see what subscriptions you are signed up for – and measure the ethics of the company by how well they disclose the nature of the negative option and how easy it is to cancel when you choose to do so.
Relevant article: