Digital Markets, Competition and Consumers Act 2024: what does it mean for charities?

The Digital Markets, Competition and Consumers Act 2024 (“DMCCA”) is a hugely wide ranging and ambitious bit of legislation. It gained royal assent on 24 May 2024. Many of its grander ambitions will not directly affect charities, but are worth being aware of. Other matters could potentially have a serious impact on charities, particularly the consumer protection elements of the legislation.

What do charities need to be aware of?

The DMCCA introduces a new regime for so-called subscriptions.

The definition of “subscription” is drafted very widely so don’t be mislead by the term. If you receive recurring payments from consumers you should be considering whether this relationship is caught by DMCC.  

In very broad terms, there are to be new rights (from Spring 2026) to regular, in most cases annual, cooling off, cancellation right in all ‘subscription contracts’ – which would catch charity membership subscriptions. For the purposes of gift aid, a refundable, cancellable payment cannot count as a donation. So many charities stand to lose out on being able to claim gift aid payments on their membership subscriptions. In March in the second reading in the House of Lords, Lord Etherton explained the impact on one charity.

“This is a matter of great financial significance to charities large and small. In its briefing, the Royal British Legion points out that it has 194,000 members, 38% of whom have Gift Aid subscriptions. That Gift Aid represents approximately 10% of total RBL membership fee revenue. This could have an obviously very detrimental effect.”

Lord Mendoza, in the same debate:

“The English Heritage Trust was established just in 2016 under its new name and in its new incarnation as a subsidiary of Historic England. It is a charity, and it holds the licence to care for and look after the national heritage collection—our stuff, if you like: 400 sites, dozens of museums, 1 million objects, from Dover Castle up to Hadrian’s Wall and including Stonehenge. I looked at the accounts, and its revenue is £130 million a year. Of that, £48 million—almost 40%—is membership income. If you fiddle with that, it could be very significant. If it makes a surplus, it all goes back into the restoration, maintenance and improvement of the national heritage collection.”

There were attempts in the House of Lords to amend the DMCC bill to exclude charity membership subscriptions, but these were rejected.  Further the government made it clear in its response to the spring budget, that in principle at least some recurring payments made by consumers to charities were intended to be caught by the DMCC subscription regime. The issues around what this would mean for gift aid were acknowledged. The then Conservative government promised to amend the gift aid legislation to address this point.  Although it is unclear what they were planning to change and, now we have a new government, if this is going to be picked up.  

In the interim we would recommend looking at all arrangements that you have whereby consumers make recurring payments or donations and get legal advice on whether these are caught by DMCC subscription regime and if there is anything that can be done to change the terms to bring them out of scope.

What does compliance mean?

Where arrangements are caught, in addition to the potential gift aid issue, charities will also need to make significant changes to bring existing arrangements into compliance. Compliance will require significant:

• changes to the signup process;
• new systems to be built to deliver mandatory notices by email;
• new online processes to cancel; and
• systems to manage consumers additional rights.

This image shows a typical consumer journey including existing legal obligations. The DMCC mandates building everything in pink. So charities will most likely have to:

• draft a new pre-contractual summary and present this to consumers as part of the signup process,
• give consumers a new regular cooling off period to allow them to cancel.
• send regular, broadly six monthly, emails or other notices.
• build a new online cancellation button.

Online reviews

From Spring 2025 there will be a new regime aimed at preventing fake reviews. Online charities must not host consumer reviews without taking reasonable and proportionate steps to either:

(i)    prevent publication of fake consumer reviews which conceal incentivisation; and 
(ii)     remove such reviews or information from publication.

There will also be new rules about how consumer reviews can be used in advertising.  All of which will be backed by new offences and civil fines of up to 10% of global turnover for breach of consumer law.

Not impacting charities directly but worth knowing  

Earlier parts of the Act deal with tackling the power of firms with “substantial and entrenched market power” and “a position of strategic significance” in digital activities in the UK  - aimed at only the largest tech companies.

Merger restriction thresholds in the Enterprise Act 2002 are being changed: where one party has a supply share of 33% and turnover of at least £350m and the target has a UK nexus. There are also some procedural changes to merger reviews.

Conclusion

This is significant legislation with potentially grave impact on charities’ incomes. We are hopeful that changes to the gift aid regime will be made in time – the previous government said that would be the case. We do not know how high up the priority list charity membership subscriptions will be – but we urge charities affected to write to their MPs to explain the potential impact.

We have a broad range of lawyers ready to help with the commercial, competition and charity aspects of this legislation. If you have any questions please contact Katrina Anderson [email protected].