Navigating recent changes to UK consumer protection laws: Part 1

The Digital Markets, Competition and Consumers Act 2024 (DMCCA) received Royal Assent on 24 May 2024 and is set to introduce far-reaching reforms to digital markets, merger control and competition rules, and consumer protection laws in the UK.

This three-part series focuses on the consumer law aspects of the DMCCA. In Part 1, we start by providing an overview of the key changes, important compliance dates, and implications for consumer-focused businesses. Part 2 will delve deeper into the changes to unfair commercial practices and subscription contracts and Part 3 will explore the enhanced enforcement powers of the Competition and Markets Authority.

For an overview of the key changes to be implemented by the DMCCA in relation to competition law, please see our previous update on the topic.

Key changes

The DMCCA introduces substantial amendments to consumer protection laws, particularly in areas that affect consumers directly in the digital economy. Please see below a brief overview of the most notable changes which we will cover in greater detail next week in part 2 of this series:

1. Unfair commercial practices: schedule 20 of the DMCCA revises the Consumer Protection from Unfair Trading Regulations 2008 (CPUT) by introducing a "blacklist" of practices deemed automatically unfair in all circumstances. This includes stricter rules against omitting material information in invitations to purchase, combating "drip pricing" and addressing the issue of fake reviews.

2. Subscription contracts: part 4 of the DMCCA establishes a new regime for subscription contracts, aimed at preventing "subscription traps" - the practice of enticing consumers into subscriptions with free trials or discounted fees, then making cancellation difficult. Under the DMCCA, businesses must now provide clear pre-contract information, send renewal reminders, offer a "cooling-off" period, and ensure easy subscription termination, including straightforward cancellation notices. The Department for Business and Trade is undertaking a consultation until 10 February 2025, seeking views on its regulatory proposals for the secondary legislation necessary to implement aspects of the new subscription contracts under the DMCCA.

CMA's enhanced powers

The DMCCA significantly enhances the powers of the UK Competition and Markets Authority (CMA) in enforcing consumer protection laws. Previously, the CMA's ability to enforce consumer law was limited, often requiring court orders or voluntary undertakings to address breaches. The DMCCA introduces a 'dual track' enforcement approach:

1. Court-based regime: this regime simplifies and enhances the existing court-based system, allowing designated enforcers, including the CMA and other regulatory bodies, to apply for court action against businesses violating consumer protection laws. Sanctions can include financial penalties up to £300,000 or 10% of a business's turnover.

2. Direct enforcement regime: the DMCCA empowers the CMA to directly enforce consumer protection laws and impose fines without court orders. This allows for quicker and more direct action against non-compliant businesses, with penalties mirroring those of the court-based regime.

This upgrade in enforcement capabilities underscores the importance of compliance for businesses operating in the digital and consumer markets.

Revisions to the framework for alternative dispute resolution (ADR)

The DMCCA also revises the framework for Alternative Dispute Resolution (ADR) in consumer contract disputes. While maintaining many of the provisions from previous regulations, new requirements under the DMCCA enhance the consistency, transparency, and impartiality of ADR services when utilised in consumer disputes. A significant change is the requirement for ADR providers to be accredited, moving away from the largely voluntary accreditation system. This shift aims to ensure that ADR services meet high standards of quality and reliability, benefiting both consumers and businesses by providing a trusted mechanism for resolving disputes.

In part 3 of this series, we will explore in more detail the updates to CMA's powers and the ADR mechanism under the DMCCA.

Recommendations for consumer-focused businesses

• Proactively start implementation planning for DMCCA compliance, particularly in light of the CMA's new, enhanced enforcement powers, including to issue significant fines for breaches without the need to go to court 

• Review commercial practices, digital content, customer communications and other customer-facing materials and assess their compliance with the new DMCCA requirements

• Assess the need to update existing compliance policies and substantially change organisational systems or practices as a result, including how pricing information is displayed or the verification processes for consumer reviews

• Consider internal training sessions on best practices for consumer-facing teams in the business (e.g. marketing, customer service, legal or compliance teams).

• Keep abreast of secondary legislation related to the consumer protection regime as well as guidance from the CMA which will help businesses to navigate the fast-changing consumer law landscape.

What's next?

The DMCCA will be brought into effect by secondary legislation in a phased process. On 9 September 2024, the UK government announced the timeline for the DMCCA's implementation: