The consumer is always right

“Not just about big tech: enhanced consumer protection under the Digital Markets, Competition and Consumers Bill”

The long awaited Digital Markets, Competition and Consumers Bill was introduced to Parliament on 25 April, as the UK’s new bill to crack down on rip-offs, protect consumer cash online and boost competition in digital markets. A huge amount has been written, and will continue to be written, about the Bill’s proposals for a new regime for digital markets overseen by the CMA’s digital markets unit (DMU). But the Bill also introduces a number of changes, in many ways equally important, to consumer protection enforcement in the UK. In this update, we outline the headline changes to UK consumer protection law proposed by the Bill.

A new system of direct consumer enforcement

Along with simplifying and enhancing the existing court-based regime, the Bill provides for a new framework for the direct enforcement of consumer protection law in the UK by the CMA. The CMA will be empowered to investigate suspected infringements and make notices in respect of provisional and final infringements, breach of undertakings and breach of directions. This is a significant enhancement of the CMA’s current consumer protection “toolkit” which relies on enforcement via the courts.

CMA gets “teeth” as a consumer regulator

The reforms also significantly heighten the consequences for “wrongdoers”, giving the CMA fining powers more on a par with those available under competition rules. Where the CMA finds an infringement, along with making directions for the infringement to be brought to an end, it may impose a monetary penalty for businesses of up to 10% of global turnover (or in the case of individuals, up to £300,000).

The CMA will also have powers to impose fines where a business fails to comply with a CMA direction (up to 5% of a business’ annual global turnover or up to £150,000 for an individual, and additional daily penalties for continued non-compliance) or fails to comply with an information notice (up to 1% of a business’ annual global turnover or up to £30,000 for an individual, and additional daily penalties for continued non-compliance).

Tackling fake reviews

The Bill introduces a new power for Government to add, remove or modify to the existing list of commercial practices which are automatically considered unfair and prohibited outright, set out in Schedule 18 of the Bill. The Government has indicated that it will use this power to ban the practice of facilitating fake reviews or advertising consumer reviews without taking reasonable steps to check they are genuine.

Subscription traps

The Bill, once law, will also clamp down on so called “subscriptions traps” that harm consumers. The Bill includes a number of duties which will apply to traders in relation to “subscription contracts” which, in very broad terms and subject to certain exceptions, are fixed term contracts with auto-renewing or early cancellation features.

Those duties will include:

• Pre-contract information: A requirement to provide certain “key pre-contract information” in clear and accessible language, including in respect of the contract term, frequency and amount of payments and cancellation rights.
• Reminders: Issuing customers with reminders where, for example, a free trial or introductory offer is about to end or a subscription is about to auto-renew, unless the customer takes action to end the contract.
• Cancellation rights: Giving consumers an easy and accessible way to cancel their subscription and a clear right to cancel during “cooling-off” periods.

What’s next?

As outlined, the Bill introduces wide-ranging reform to UK consumer protection law and enforcement, alongside its well-publicised competition and digital markets reforms. For consumer focused companies, there will be a clear and obvious need to positively engage with these reforms and avoid falling foul of the new rules.

The Bill is at an early stage in its journey through Parliament, with the date for its second reading still to be announced. How long it will take for the Bill to reach Royal Assent and become law will depend on a number of variables, including other matters demanding Parliamentary time. What is clear is that the Government have indicated their commitment to bring the new measures into effect “as soon as possible following parliamentary approval” subject to secondary legislation and the publication of guidance. Over the coming months, we will be keeping a close eye on the Bill’s progress.