What the new rules say and how to implement them
Automatic renewal: maximum term is one month
The most important change in March 2022 are limitations to automatic renewal in general terms and conditions (GTCs) in consumer agreements covering recurring delivery of goods or provision of services or works (Recurring Agreements) – see new section 309 no. 9 lit. b and c of the German Civil Code (Bürgerliches Gesetzbuch – BGB).
Under the new rules, automatic renewal of a contract will only be effective if:
- the term of the Recurring Agreement is indefinite (i.e., there is no fixed term); and
- the Recurring Agreement can be terminated at any time by the consumer giving one month’s notice.
If a fixed term is agreed, the maximum duration is two years (section 309 no. 9 lit. 1 BGB). Any notice period under a Recurring Agreement must not be longer than one month before the end of the agreement (section 309 no. 9 lit. c BGB).
This applies to Recurring Agreements that are concluded on or after 1 March 2022. The new rules do not apply to Recurring Agreements concluded before 1 March 2022, and businesses do not have to switch to the new rules.
Implementation of the requirements for automatic renewal, term and termination
Many organizations will have to change their B2C GTCs with respect to automatic renewal, term and termination. For example, the following is permitted: fixed terms of up to two years with a one-month notice period plus automatic renewal of the term after expiry of the two years with the consumer having the right to terminate it at any time by giving one month’s notice.
Termination button to make termination easy
Compared to the rules applicable to all GTCs, the scope of the rules regarding the termination button(s) is limited as follows: the new rules apply only to consumer agreements for a service against payment (section 310 (3) BGB) in electronic commerce (Sec. 312i (1) BGB) that provide for a continuing obligation.
The organization must:
- Enable the consumer to:
- to terminate the agreement by means of a so-called termination button (see below for the concrete design of this termination button);
- to provide information about
- the type of termination;
- in the case of termination in exceptional circumstances, the reason for termination;
- clear identifiability of the consumer and the relevant agreement;
- the date of contract termination given in the termination notice, as well as details of the immediate electronic transmission of the confirmation of termination to him/her
- save the submitted termination notice, together with the date and time of submission, on a permanent data carrier.
- Immediately confirm by electronic means (e.g., email) the contents, and date and time of receipt, of the termination notice and the date and time at which the agreement is to be terminated by the termination in text form by electronic means (e.g. e-mail).
The amendments to section 312k BGB (termination button) come into force on 1 July 2022. The regulations of the new section 312k BGB will then also apply to agreements concluded before this date (new article 229, section 60 sentence 3 German Introductory Act to the Civil Code (EGBGB).
Implementation of the requirements for termination button(s)
In fact, two clickable buttons are required:
- Button to initiate the termination in the local language e.g., "Terminate agreements here" (German: “Verträge hier kündigen”) or “terminate agreement” (German: “Vertrag kündigen”), or with appropriate and unambiguous wording (no more than three words, with the legal consequences made clear). The button should lead to a confirmation page.
- On the confirmation page (providing a form requesting the user to enter information about termination, identification of the person terminating the agreement, and of the preferred date of termination), the second button must be prominently placed with nothing other than the words “Terminate now” (German: “Jetzt kündigen”). Where a login area exists, login must not be required at any point between clicking the first button (“Terminate here") and the appearance of the “Terminate now” button.
Design of the buttons
- Easy-to-read button: font type, size and colour must ensure that the information is not hidden but clearly visible and easy to read; it must stand out from the rest of the text and other design elements. The background (e.g., colour of the button) must not make the process more difficult and key wording must be in a prominent position.
- Placement in a clearly visible position: the button must be easy to find without a long search. No placement in the immediate vicinity of a button with a confusingly similar design.
- The buttons and confirmation page must be available at all times.
- The consumer must be given the opportunity to permanently save the termination notice submitted online, including the date and time, e.g., by means of a downloadable PDF.
- The consumer must receive immediate confirmation of termination in writing by electronic means in text form (e.g., by email). The consumer must be able to save the confirmation of termination, together with the date and time of submission, on a durable medium for verification purposes (new section 312k (3), (4) BGB).
- If the consumer does not specify a date on which the termination is to take effect, it shall be presumed that the earliest possible date is intended (new section 312k (5) BGB).
What could happen if organizations do not comply with the new rules
Failure to meet the new requirements can lead to immediate termination of agreements, claims by consumer protection agencies or even fines.
Other amendments based on the Fair Consumer Contracts Act
The German Fair Consumer Contracts Act sets out amendments to the BGB and the German Unfair Competition Act (Gesetz gegen unlauteren Wettbewerb – UWG). In addition to the above-mentioned amendments, the following rules came into force on 1 October 2021:
- Under the new section 308 no. 9 BGB, clauses in GTCs are invalid if they exclude (i) the assignability of a contractual party’s monetary claims against the user (of the GTCs), or (ii) exclude assignment of other rights that the contractual partner has against the user if this is necessary as part of a balancing of interests.
- Under the new section 7a UWG, the consumer’s prior consent to telephone advertising must be recorded in writing and retained for five years.
Possible consequences of not taking (timely or sufficient) action
- Fines of up to € 2 million or 4 per cent of the company’s total annual global turnover for the previous financial year, as established under the new sanction regulations due to come into force on 28 May 2022 (introduced to implement the EU Omnibus Directive – (EU) 2019/2161)).
- Claims for damages from users.
- Injunctions from competitors or consumer protection associations.
- Termination of the agreement at any time and without notice (new section 312k (6) BGB).
- Reputational damage: loss (of the trust) of consumers due to negative publicity.
Recommended To-Do’s for organizations
Amendments to GTCs on and/or the German website:
Taking into account the benchmarks/guidance from above:
- Check GTCs regarding term and termination for Recurring Agreements.
- Check that the termination button has been added:
- Option 1: Insert a link on every page in the footer, next to the links to the legal notice, the GTC, etc.
- Option 2: Insert the appropriate buttons in the user account/profile in the “paid subscriptions” section.
- Option 3: Amend the relevant section of the GTCs.
- Restructure existing internal processes with regard to termination and billing processing.
Further updates coming in 2022
During the first half of 2022, further legislative changes have come and will come into force in Germany, that will strengthen consumer rights and modernize German law.
Client Alert Part I updated you on legal changes in connection with digital products and corresponding new provisions in the area of sales of consumer goods.
In this Client Alert Part II we have updated you on changes in regards to new consumer protection laws affecting providers of commercial services.
And in our Client Alert Part III we will update you on new consumer protection rules in the area of online commerce, rules on so-called ‘coffee runs' and claims for damages, as well as fines. Stay tuned!
Client Alert 2022-082