Consumer-facing businesses scanning the horizon for the year ahead should take note of important changes to consumer protection laws which are expected to come into force in the first half of 2024. The Digital Markets, Competition and Consumers Bill (DMCC), on which the Government consulted in the Autumn following its publication in April last year, is expected to receive royal assent by the Spring.
The new legislation will strengthen consumer protection laws by addressing harmful trading practices and improving price transparency and product information for consumers. It will also make it easier for the Competition and Markets Authority (CMA) to enforce consumer protection laws so companies carrying out unlawful practices will be more likely to face fines and other penalties. Businesses will need to consider whether their existing practices and consumer contracts are compliant or require amending in the light of these changes.
Enhanced consumer protection
The Government has already confirmed that the current EU-derived consumer protection regime will remain in force in the UK under the new legislation (albeit with minor amendments). As we discussed in an earlier article, the DMCC revokes the Consumer Protection from Unfair Trading Regulations 2008 (CPRs), but reinstates its basic principles and protections in domestic law. The DMCC goes further, however, by introducing new rules designed to curb pernicious practices that have developed in consumer goods and services markets.
A key aim of the DMCC is to improve information transparency for consumers, to ensure they can make informed choices about the products and services they purchase, from booking hotels online to signing up to a gym memberships. The Government’s consultation (the results of which have not yet been published at the time of writing) sought stakeholders’ views on how best to provide consumers with clear, timely and relevant information, as well as how to increase competition among traders by ensuring information is provided in a consistent manner.
The Government’s legislative focus is on the following issues:
- The display of pricing information including the consistent use of unit pricing. The Government proposes that the Price Marking Order 2004 be simplified so that the unit price for all products must be displayed to allow for easy price comparison between products.
- Restricting hidden fees and drip pricing practices, where consumers are enticed with low prices but fees are added as they progress through the purchasing process, such as compulsory components of an airfare or delivery fees.
- Fake and misleading reviews. The Government is considering expressly prohibiting the submitting or commissioning of fake reviews as well as requiring companies to take reasonable and proportionate steps to protect consumers from fake reviews.
- Like any consumer business, online platforms are required to act with professional diligence in their dealings with consumers. However, the Government is concerned that application of the relevant standards to online platforms (particularly e-commerce on social media sites) is not well understood and guidance / regulation is expected in this area.
- At present consumers can only exercise private rights of redress against traders (eg the right to rescind the contract, obtain a discount or claim damages) where they have suffered from misleading actions or aggressive practices. The Government proposes expanding these rights to cover further unfair commercial practices such as misleading omissions or breaches of professional diligence by traders.
- Subscription contracts, on which the Government estimates that consumers spend £1.6 billion per year. These are contracts which either auto-renew unless the consumer takes action to terminate them and / or contain a free or reduced-price trial after which the consumer becomes liable for higher fees unless they take action to terminate. The DMCC introduces a new set of requirements specific to these contracts which will be easier to enforce.
Enforcement and penalties
The Government has identified enforcement as a key weakness in the current consumer protection regime, in particular procedural difficulties for enforcers and weak sanctions for breaching the law. Currently, where the CMA concludes that consumer law has been breached, it has no powers to order the cessation of illegal practices: it must go through the courts. Even if an order is made, no fines are available. The CMA can accept undertakings from a trader, as an alternative to taking it to court, but the CMA cannot fine the business if it does not comply with the undertaking.
The DMCC introduces a new direct enforcement regime administered by the CMA for infringements of the core consumer protection legislation such as the Consumer Rights Act 2015, the CPRs and the new offences created under the DMCC. The new powers will allow the CMA to investigate suspected infringements directly and issue enforcement notices and impose fines of up to 10 per cent of an infringer’s global annual turnover. Appeals against enforcement decisions will lie to the courts.
A simplified version of the current court-based regime (provided under Part 8 of the Enterprise Act 2002) will continue to apply to breaches of the consumer protection legislation. Importantly, it will empower the courts to impose monetary penalties on traders who breach consumer laws or do not comply with an undertaking.
The potential expansion of the private rights of redress regime is also likely to see more claims by consumers challenging businesses in the small claims courts for failing to set out relevant information at the pre-contact stage. Parliament rejected a proposed amendment to expand the scope of collective actions before the Competition Appeal Tribunal to include actions based on consumer protection law, but large business-to-consumer companies in particular should note that this may well be a future direction of travel.
Under the new regime we can expect to see greater focus by the CMA on consumer protection with increased and swifter enforcement, using its new direct enforcement powers.
With potentially very significant fines on the table, businesses would be well advised to follow the progress of the DMCC and once it comes into force: (i) ensure they are familiar with the specific legislation which applies to their business, (ii) review their trading and marketing practices to ensure that they are compliant and / or identify risk areas or staff training needs.
This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.
© Farrer & Co LLP, January 2024