Originally announced in the Queen's Speech 2022, the Government has introduced the Digital Markets, Competition, and Consumers Bill to Parliament. The Bill will make notable changes to the UK's consumer law, strengthening consumer law protections as well as the Competition and Markets Authority's ("CMA") enforcement abilities as the consumer law regulator.
In this blogpost we look at the changes the Bill will make to consumer protection law. For more information on the competition law aspects of the Bill please see our previous blogs: changes to the regulation of digital markets, changes to the UK merger control regime and investigating and enforcing competition law breaches.
New Consumer Protection enforcement powers
The CMA does not hold many enforcement powers under the current consumer law legislation. The CMA can ask businesses to accept voluntarily undertakings to change their business practices to align with the law. However if a business refuses to accept or fails to enact a voluntary undertaking, the CMA must apply to the courts and prove that a breach of consumer law has occurred. The CMA also cannot currently issue fines for consumer law breaches.
If passed, the Bill will substantially reform the CMA's enforcement role.
The Bill will allow the CMA to decide if consumer protection law has been breached, bringing its consumer law powers in alignment with its existing competition law capabilities.
The CMA will have the ability to issue infringement notices, directions, and substantial fines to businesses. It is proposed that the maximum fines will be 10% of a business' global annual turnover for breaches of consumer law and 5% of global annual turnover for breaches of voluntary undertakings or CMA directions.
The CMA will also be able to impose additional penalties of up to 5% of a business' global daily turnover for non-compliance. This is far harsher than the fines set under the EU's New Deal for Consumers which gives Member States the power to fine companies 4% of the turnover within the concerned Member State in which the breach took place.
With consumer protection and enforcement of consumer law highlighted as areas of focus in the CMA's Annual Plan for 2023/2024 it can be assumed the CMA will seek to use its new powers to improve compliance with consumer protection laws.
Changes to consumer protection laws
The Bill also strengthens consumer protection laws by introducing stricter rules and requirements on consumer facing businesses.
Key reforms include:
- Reforming unfair commercial practices in primary legislation. The Bill will revoke the Consumer Protection from Unfair Trading Regulations and reinstate consumer protections within the Bill. The Bill prevents the use and promotion of unfair commercial practice. These include misleading actions or omissions, and aggressive practices.
- Consumers will have certain rights conferred on them concerning these practices, for example, the ability to unwind a contract with a business whose conduct falls within these practices.
- If a product is supplied by inertia selling, consumers will also have no obligation to pay for it. If the product was never requested, then consumers are advised to treat it as a gift and businesses will not have the ability to demand the return, payment or safe storage of that product.
- To ensure that the legislation keeps up to date with evolving unfair commercial practice, the Secretary of State will also have the power to amend the list of practices considered unfair under the Bill.
- Protecting consumers from so-called "subscription traps", where a consumer is misled into signing up for a subscription service. The Bill will require businesses to supply clear pre-contractual information to consumers setting out the nature of the subscription as well as ensure consumers can terminate the service easily. Businesses will also have to provide customers with a timely reminder that introductory offers, such as a free trial, are coming to an end.
- Protecting consumers from "saving scheme" risks. "Saving schemes" are when consumers pay a sum of money to a trader which is credited to an account from which they can use the funds to redeem goods or services. The Bill will require businesses operating schemes to ensure consumer funds are fully safeguarded, for example, by having the funds insured and notifying the consumer of these details. Businesses will also be required to update and clarify regulations on package travel.
- Alternative dispute resolution (ADR). The Bill will restate existing obligations in relation to the obligation on traders to tell consumers of the availability of any ADR scheme when dealing with complaints. Under the Bill, ADR providers will be regulated and subject to an accreditation scheme unless they are a statutory regulator or identified as being subject to an existing regulatory scheme.
Combatting fake reviews
The Government is also consulting on the impact and prevention of fake reviews with the intention of tackling their prevalence.
The intention is to enact further legislation prohibiting the commission of fake online reviews, posting reviews without taking steps to ensure they are genuine or advertising to submit fake reviews for businesses.
Moving Forward
This Bill will have a major impact on consumer facing businesses, especially those operating subscription services or saving schemes. The Bill will need to pass through UK Parliament and receive royal assent before it becomes law. On the current trajectory, it is estimated that royal assent can be expected in Spring 2024. The legislation would then come into effect shortly thereafter, subject to secondary legislation and the publication of supporting CMA guidance.
We will continue to publish updates as the Bill progresses. In the meantime, consumer facing businesses should review their practices and marketing and advertising and consider what changes they may need to make.
If you have any questions on the Bill or on consumer protection law generally, please get in touch with Martin Sloan or Grant Strachan.
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