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Important developments in consumer protection legislation

Insight

cyber abstract

UK consumer protection legislation has been significantly shaped by European legislation. With the existential threat of the Retained EU Law Bill (REUL Bill) hanging over much of this legislation (see this article), there had been a concern that the REUL Bill could cause considerable change and confusion to the UK’s consumer protection laws.

Thankfully, two important pieces of the puzzle were provided last week:

  • First, we heard reports of a government climbdown on the Bill (see this article). Instead of all pieces of retained EU law being removed in a single go, Kemi Badenoch, the Secretary of State for the Department for Business, told the Conservatives that the majority of the laws (an estimated 4000 pieces) would remain, with perhaps up to 800 specific pieces of legislation being removed instead.
  • Second, and perhaps more importantly, the Government published its long-awaited Digital Markets, Competition and Consumer Bill (DMCC Bill), which clearly sets out the Government’s intentions for consumer legislation in years to come.

 

Current legal landscape

Much of the UK’s consumer protection legislation is derived from EU directives that were implemented prior to Brexit. This legislation provides individuals with much of their core consumer protection rights and forms an integral part in the UK’s consumer protection framework. It includes:

  • The Consumer Protection from Unfair Trading Regulations 2008 (CPRs). The CPRs prohibit traders from engaging in unfair commercial practices with consumers. A commercial practice will be seen as “unfair” if it falls below the standards expected of a trader in their industry, and it affects (or is likely to affect) a consumers' ability to make an informed decision about whether or not to purchase a particular good and/or service. Unfair practices include misleading omissions and misleading actions. A misleading omission is when a trader leaves out key information that the consumer needs to make an informed decision about whether or not to purchase a good and/or service. A misleading action is when a trader provides false information that misleads consumers and cause or could cause the average consumer to take a different transactional decision. The CPRs also prohibit aggressive practices. These are practices that use harassment, coercion or undue influence that cause or could cause a consumer to take a different transactional decision, such as the use of threatening language or exploiting vulnerable people. The CPRs also contains a list of 31 blacklisted (banned) practices which are always considered to be unfair, such as falsely claiming that a product can cure a disease and operating pyramid schemes.
  • The Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013(CCRs). The CCRs require traders to provide consumers with certain prescribed information at the point a consumer contract is formed. This prescribed information differs between contracts that are formed on premises (for example, in a high street shop), online or off-premises (for example, in a consumer’s own home).  Importantly, it gives consumers the right to cancel certain contracts within an initial period after contract formation. Under the CCRs, consumers who buy goods online can cancel their contract during the 14 days after the consumer has taken ownership of the goods (known as the cooling-off period). This right can be exercised by consumers for any reason, including if they are not happy with the product or have simply changed their mind.
  • It is worth noting that the Consumer Rights Act 2015 (another key piece of the UK consumer protection legislation that provides the framework for fairness and transparency in consumer-facing terms and conditions) is primary legislation, which means it was always outside of the REUL Bill’s scope.

 

Impact of DMCC Bill

  • Pre-existing consumer rights protected. While the changes being introduced by the DMCC Bill are unsurprisingly the ones generating most of the headlines (see below), of equal interest / reassurance to businesses selling directly to consumers is the fact that the current EU-derived regime will remain in force under the new DMCC Bill (albeit with minor amendments).  In practical terms, we now know that the DMCC Bill will revoke the CPRs, but reinstate its basic principles and protections into domestic law. This includes protections covering unfair commercial practices as a result of misleading actions or omissions and aggressive commercial practices.

    It is worth noting that the DMCC Bill does explicitly mention the CCRs. The new legislation will create a stand-alone cancellation regime and pre-contract information rights for consumers entering into subscription contracts. In doing so, it also confirms that the relevant parts of the CCRs that create an equivalent regime for all other consumer contracts will be disapplied for subscription contracts. This strongly implies that the CCRs are here to stay.

  • Enhanced consumer protection. The DMCC Bill will bolster the protections currently provided by the CPRs by including a new power for the secretary of state to add to the current list of blacklisted (banned) practices through secondary legislation. The DMCC Bill policy summary briefing confirms that this new power is intended to allow government to update the list of banned practices swiftly so that it can reflect new business practices and emerging consumer harms. It also confirms that the Government intends to use this new power to tackle the issue of fake reviews by prohibiting the commissioning, hosting or the production of fake reviews. The briefing confirms that the Government will continue to consult on the detail of this prohibition as the DMCC Bill works its way through Parliament.

    As noted above, so-called ‘subscription traps’ are also being tackled in the Bill. This includes new requirements for traders to provide prescribed pre-contract information to consumers before they enter into a contract, such as information about the price, the automatic renewals mechanism and the cancellation methods and rights.  Traders are also required to issue reminder notices to consumers alerting them that a contract is due to automatically renew and that a renewal payment will be due unless the consumer takes steps to end the contract. The DMCC Bill also includes additional cancellation rights for consumers which are aimed to make the cancellation of subscription contracts easy, cost-effective and swift. This includes the creation of a new 14 day cooling-off period which is available both at the start of the subscription contract and after subsequent renewals.

    The CMA’s role in enforcement of UK legislation will be substantially strengthened, including by enabling it to take direct action against companies for breaches of consumer law. This provides an alternative route to the existing court-based regime and aims to speed up enforcement action. The CMA will also be able to impose undertakings and fines of up to 10% of annual worldwide turnover.

  • Implementing the UK’s new digital markets regime and making significant changes to the UK’s competition law regime. Most of the buzz around the DMCC has been generated by the creation of a new digital markets regime and the changes to competition law.  These are outside the scope of this note, but mentioned for completeness.

Although much of anxiety created by the REUL Bill has now eased, consumer-facing business should not rest on their laurels. The DMCC Bill creates a number of new consumer protection rules and regimes that could severely impact current business practices. It is therefore important that relevant businesses (particularly those with subscription-based models) review their current practices to ensure compliance once the new legislation comes into force.

This publication is a general summary of the law as at the date of publication. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, May 2023

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About the authors

Jane Randell

Senior Counsel

Jane is Senior Counsel and the knowledge lawyer in the Intellectual Property & Commercial team. Jane supports the IP&C team to ensure they can deliver the best possible service to clients. She keeps the team up to speed with the latest developments in both law and practice, provides the team with resources required to undertake client work efficiently and accurately, and provides regular training sessions to all team members. She also provides supervisory support to junior members of the team.

Jane is Senior Counsel and the knowledge lawyer in the Intellectual Property & Commercial team. Jane supports the IP&C team to ensure they can deliver the best possible service to clients. She keeps the team up to speed with the latest developments in both law and practice, provides the team with resources required to undertake client work efficiently and accurately, and provides regular training sessions to all team members. She also provides supervisory support to junior members of the team.

Email Jane +44 (0)20 3375 7198
Andrew Rogers lawyer

Andrew Rogers

Associate

Andrew advises clients on a range of commercial, intellectual property (IP) and data protection issues.

Andrew advises clients on a range of commercial, intellectual property (IP) and data protection issues.

Email Andrew +44 (0)20 3375 7324
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