Imagine signing up for a streaming service’s free trial, only to be auto-charged after a month with minimal notice—one that many users miss. Or struggling to cancel a gym subscription buried behind endless confirmation pages. These tactics, long favored by subscription businesses to enhance recurring revenue, are now under regulatory fire worldwide.
For example, a recent Fair Trade Commission
The subscription economy is one of the fastest-growing sectors of modern business, with the top services boasting over
However, a global shift is underway. Mounting user complaints—for example, the FTC receiving an average of
Dark patterns, defined as deceptive design elements used to manipulate users into taking unintended actions, exploit psychological biases and user habits to benefit businesses at the expense of consumers. \ Key Global Regulations Affecting Subscription Models
- USA:
FTC Click-to-Cancel Law (Effective May 2025)- The FTC is using existing laws and pursuing new rulemaking to require businesses to make cancellation as easy as signup. If a user can sign up online, they must be able to cancel online in the same number of steps
- South Korea:
Dark Pattern Law (Effective Feb 14, 2025)- Mandates explicit user consent within 30 days before converting free trials to paid subscriptions.
- Bans conversion tactics like sequential price disclosure (hiding charges until later steps), pre-selection of subscription plans.
- Requires cancellation to be as simple as sign-up.
- United Kingdom:
Digital Markets, Competition and Consumers Act (DMCCA) (Phased roll out till 2026)- Requires clear disclosures about subscription terms and pricing.
- Mandates renewal reminders and easier cancellations.
- Introduces a 14-day cooling-off period and refund options.
- California:
AB 2863 (Effective July 1, 2025)- Requires express affirmative consent for automatic renewals.
- Enforces clearer notifications for renewals, fee changes, and cancellation procedures.
How These Laws Impact Business Metrics and Growth Strategies
These regulations necessitate major changes to subscription funnels, including purchase, renewal, and cancellation processes. Metrics such as conversion rates, churn, and renewal rates may see short-term shifts. However, the primary users lost will likely be those who were not actively engaged and were paying out of inertia or forgetfulness.
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Auto converting plans (‘Free’ Trial, Annual Plan): With stricter opt-in requirements for auto-converting trials, businesses may see a lower initial trial-to-paid conversion rate. Data shows that auto-converting trials have an average conversion rate of 48%, whereas non auto converting trials convert at 18-20% (
First Page Sage ). While this may impact conversion revenue, subsequent month-1 churn could also be reduced (good thing), as fewer users find themselves unexpectedly charged and promptly cancel. Furthermore, businesses can anticipate a reduction in customer support complaints, negative reviews, and refund requests.
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Default Plan Selection: Many companies pre-select options such as annual plans or higher-tier pricing. This is often done because of the default effect, a well-documented psychological phenomenon where users tend to favor pre-selected choices. As the
article from Learning Loops explains, people often take mental shortcuts and perceive defaults as the 'right' or recommended option. While this can simplify the decision-making process, it also creates an opportunity for businesses to steer users towards more profitable options, even if those options aren't the best fit for the user's needs. In subscription services, this can lead to users paying for features they don't use or committing to longer terms than they need. However, regulations like Korea's, if adopted more widely, could require businesses to rethink their plan presentation. They may need to remove or significantly reduce the dependency on default selection and instead present options in a way that actively helps users identify and purchase the plan best suited to their individual needs
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Cancellation Flow Optimization: Majority of subscription companies use multi-step cancellation flows. It's well-established that optimized cancellation flows with relevant save offers can significantly improve retention rates. Some reports suggest 20%-30% of users who initially intend to cancel can be saved (
ProsperStack ,Churnkey ) . However as the regulations mandate that the cancellation process should be as easy as the purchase process, meaning the number of steps should be the same. Within this constraint, subscription companies can leverage data to determine which screen(s) within a multi-step flow are most effective at retaining users and prioritize keeping those screens to balance legal compliance with business objectives. While businesses will still be able to present offers in some countries, they must now prioritize transparency and user control, ensuring users can easily decline and proceed with cancellation. Exploring alternative retention strategies like proactive win-back campaigns could also be a good alternative to long cancellation flow.
Adapting Subscription Strategies for Long-Term Growth
To navigate these regulatory changes, businesses must shift their focus from reliance on passive retention to proactive value creation. Instead of optimizing for friction-heavy retention, companies should:
- Invest in robust and user-friendly consent management systems: Develop reusable consent flows for key moments like trial conversions, renewals, and promotions, ensuring consistent application across communication channels such as email, in-app notifications, and SMS.
- Showcase Value Sooner: Invest in feature activation and key feature discovery so users realize the value of the service early, increasing voluntary conversions
- Leverage AI-Powered Personalization: AI can play a crucial role in guiding users, personalizing their experience, and building stronger relationships. For instance, agent AI can assist users in selecting the most appropriate subscription plan based on their needs and usage patterns, going beyond simple default selections to provide truly tailored recommendations.
- Long-Term success metrics: Instead of focusing solely on short-term revenue gains, businesses should prioritize long-term metrics such as user retention, customer lifetime value, and engagement. These metrics are critical for assessing sustainable growth, whether for subscription-based or pay-per-use models, and ensure that businesses are cultivating loyal, satisfied customers over time.
A New Era of User Responsibility
End-users will also need to adapt. The shift away from "auto-pilot" subscriptions may introduce some friction, requiring users to actively manage their subscriptions and provide consent more frequently. This increased responsibility, however, ultimately empowers users to take greater control of their finances and service choices.
The Future of Subscription Growth
Ultimately, subscription businesses must move beyond dark patterns and mere regulatory compliance. Instead of asking, “Does this flow comply with the law?” or “Does this increase short-term metrics?”, companies should challenge themselves with:
“If users were fully informed and had complete control, would this flow still drive the desired outcomes, or are we relying on manipulation?”
By embracing transparency and customer-centricity, businesses can build sustainable subscription models that drive both revenue and trust.
