The peak body representing gyms in Australia has criticized a proposed change to consumer law that aims to make it easier for customers to cancel memberships and avoid “subscription traps.” AUSactive, which represents major chains like Anytime Fitness and Snap, argues that such reforms could threaten the sector’s financial stability.
As gyms gear up for the annual surge of new members driven by New Year’s resolutions, AUSactive is pushing back against the Albanese government’s framework on unfair trading practices. The proposed reforms are designed to address gaps in existing consumer protection laws, with subscription traps identified as one of several “dark patterns” that would be prohibited.
Consumer Law Reforms Target Subscription Traps
While subscription traps have primarily been associated with online platforms, Assistant Competition Minister Andrew Leigh has indicated that gyms will also fall under the scrutiny of these reforms. The initiative, which gained momentum after state and territory consumer affairs ministers agreed in November, seeks to ensure fairness in consumer contracts.
Ahead of a final consultation period before the legislation is expected next year, AUSactive’s CEO Ken Griffin expressed concerns that laws intended for online businesses might be inappropriately applied to physical gym operations. He emphasized the differences between digital services like Netflix and the operational realities of running a gym.
“Scaled online business models such as Netflix are fundamentally different to owning a gym, which means a physical place which requires the owners to pay rent and pay for staff, supervision and other running costs,” Griffin stated.
Challenges of Current Gym Membership Practices
Current laws broadly protect consumers against unfair contract terms, but critics argue that gyms often fail to clearly outline cancellation procedures in membership contracts. Requirements such as providing proof of relocation or medical certificates to exit memberships are common, along with penalties for early cancellation of discounted long-term memberships.
Advocates for the reforms highlight additional issues, such as the need for members to visit a branch in person to cancel, and excessive fees for pausing or terminating memberships. They urge the government to ensure that cancelling a membership is as straightforward as signing up.
Consumer advocates have asked the government to craft the legislation to make it “as easy to cancel as it is to sign up,” a sentiment echoed by similar efforts in the U.S. that faced legal challenges.
Industry Concerns and Smaller Operators’ Perspectives
Griffin argues that making it easier for people to exit contracts could undermine the industry’s traditional business model, which relies on revenue certainty from membership commitments. He points out that gyms must maintain readiness for members, regardless of their attendance frequency.
Smaller operators like Lynsey McGee and Mac Redinbaugh of Hiscoes gym in Sydney’s Surry Hills emphasize the importance of accountability to their community. They have adopted more flexible membership options, allowing for easier cancellations and fostering goodwill among members.
“This is a community gym. I eat my breakfast out the front. If I was making any part of this process unpleasant, I’d have to eat breakfast next to these people whose lives I’ve made harder,” Redinbaugh noted.
McGee and Redinbaugh believe that while reforms to prevent customer traps are necessary, they should be carefully crafted to avoid unfairly impacting gyms and small businesses with physical locations.
Economic Impact and Future Considerations
Membership fees are the primary revenue source for Australia’s approximately 8,000 gyms and fitness centers, accounting for about $2.2 billion of the sector’s $3.7 billion annual revenue, according to IBISWorld. Other income streams include personal training, classes, and casual entry fees.
Erin Turner, CEO of the Consumer Policy Research Centre, asserts that while some gyms have adopted good practices, the sector as a whole needs improvement. She describes gyms as pioneers of subscription traps, a practice exacerbated by the online world.
“Gyms definitely have a lot to answer for. I think they’re the originators of subscription traps, something which has gotten worse in the online world,” Turner stated.
As the debate over consumer law reforms continues, the gym industry faces the challenge of balancing business sustainability with fair consumer practices. The outcome of this legislative process could set a precedent for how subscription-based services are regulated in the future.
