Cancellation Button Required Even for Automatic Contract Terminations

The Federal Court of Justice (BGH) has ruled that a cancellation button is essential even when a consumer pays a one-time fee and the contract is set to terminate automatically. This decision aims to bolster consumer rights in the digital marketplace.

Since July 2022, providers of ongoing service agreements have been mandated to include a cancellation button on their online platforms. However, the specifics of this legal requirement have often been contested. In a recent ruling issued on May 22, the BGH clarified that according to Section 312k of the German Civil Code (BGB), a cancellation button is necessary even if the consumer is only required to make a single payment, and the contract is designed to end automatically.

This case arose when the Federal Association of Consumer Organizations (vzbv) filed a complaint against the online retailer Otto.de. The company offers a benefits program called 'Otto Up Plus' for an annual fee of EUR9.90, which lasts for twelve months before automatically expiring. The vzbv initially warned Otto.de for not providing a button for extraordinary cancellations. The Higher Regional Court of Hamburg dismissed the case, arguing that 'Otto Up Plus' did not qualify as an ongoing service agreement under Section 312k BGB, thus negating the need for a cancellation button.

The BGH overturned this lower court's decision, siding with the vzbv's appeal. The court mandated that Otto.de cannot offer paid benefit programs without enabling consumers to easily cancel their subscriptions through a designated button. Consequently, Otto.de has been ordered to pay EUR260 plus interest to the consumer protection group.

Defining Ongoing Service Agreements

In its ruling, the BGH broadened the interpretation of ongoing service agreements. The court emphasized that such agreements are characterized by the continuous or recurring delivery of services by the provider, which are contingent on the duration of the contract. In this instance, Otto.de's offering included ongoing point credits and free shipping during the subscription period, thus classifying it under the relevant statutory provisions.

The BGH rejected the argument from the Higher Regional Court that a one-time consumer payment eliminates the risk of a 'cost trap,' suggesting that consumers do not require protection in such cases. The court emphasized that the legislation was primarily concerned with simplifying the cancellation process for electronically concluded contracts, as complexities in canceling these agreements could delay their termination.

A Wake-Up Call for Online Service Providers

The BGH's ruling serves as a significant reminder for digital service providers and membership platforms. Legal expert Jens Ferner noted that businesses offering convenient contract sign-up processes must also ensure that consumers have equally straightforward options for contract termination. The focus of consumer protection in the digital space is to facilitate the cancellation process.

Upcoming Requirements: The Cancellation Button and Revocation Button

Additionally, a new revocation button will be mandatory starting June 2026. This feature will allow consumers to revoke contracts made online with just a click. This initiative is part of a legislative proposal published by the Federal Ministry of Justice and Consumer Protection, aiming to implement updated EU directives regarding consumer and insurance contracts. Justice Minister Stefanie Hubig emphasized that the process of revoking contracts should be as simple as placing an order online.

The draft proposal, which must first pass through the federal cabinet, will require this online feature for contracts related to goods, services, and financial services. However, contracts for financial services will only be revocable within a maximum timeframe of twelve months and 14 days following the conclusion of the contract, provided consumers have been informed of their right to revoke. For life insurance contracts, the revocation period will extend to 24 months and 30 days. Currently, consumers can revoke relevant contracts without any time limit even after receiving the necessary information.