Background on Ricardo Monreal and the Reform Initiative
On December 12, a decree was published in the Official Gazette (DOF) to reform the Federal Consumer Protection Law concerning the cancellation of digital subscriptions and memberships with recurring charges. The initiative, driven by Ricardo Monreal, aimed to safeguard consumers from digital service providers who frequently commit abuses by making deceptive periodic charges and imposing obstacles when users attempt to cancel their subscriptions.
Ricardo Monreal, a senator from the Morena party, has been active in proposing legislative changes. While this writer often disagrees with the political motivations behind most initiatives from Morena’s supermajority, this particular reform seemed more spontaneous and genuine. Many consumers have experienced finding unfamiliar recurring charges on their accounts or lacking necessary information to identify the service being paid for.
Scope of the Reform and Its Implications
However, the reform extended beyond digital subscriptions and memberships with recurring charges, as well as “digital service providers.” The reform added two sections to Article 76 Bis of the Federal Consumer Protection Law, applicable to “all transactions carried out through electronic, optical, or any other technology means.” This implies that the new obligations apply to any service provider if the contract is made through electronic or other technology means, even for one-time transactions rather than subscriptions or recurring charges.
Initially, the reform seemed to target streaming platforms like Netflix, Prime, or HBO; digital service providers such as Apple or Google; and even single-transaction services like airline ticket purchases through an airline’s app or lab test orders via a laboratory’s website. Moreover, services provided by Uber or Didi, including food delivery and mobility services, must also include immediate cancellation mechanisms for consumers—even for non-members.
While immediate consumer cancellation may not have consequences in some cases, it could lead to losses for providers who might have invested resources or reserved spaces for the contracted service. The obligation should have been regulated more carefully, considering all possible factual scenarios, especially since the penalty for noncompliance could exceed 4 million pesos according to Article 128 of the Federal Consumer Protection Law.
Comparison with US Regulations
Legislators claimed to base the reform on the “Click-To-Cancel” rule in the United States. However, US regulations focus on subscription contracts and granted providers 180 days to implement the rule. In contrast, the Mexican reform took effect immediately, showcasing potential legislative deficiencies that could lead to regulatory uncertainty or overreach. Investors might start losing confidence in the regulatory environment.
Key Questions and Answers
- What was the purpose of the reform? The aim was to protect consumers from deceptive periodic charges and obstacles when canceling digital subscriptions.
- Which sectors does the reform affect? The reform impacts various sectors, including streaming platforms, digital service providers, airline ticket purchases, lab test orders, and ride-hailing services.
- What are the concerns regarding the reform? Critics argue that the immediate cancellation obligation may cause losses for service providers and that the reform lacks careful consideration of all possible scenarios. Additionally, the hasty implementation might create regulatory uncertainty.
