The UK Government’s response to its consultations on ‘Reforming competition and consumer policy’ (April 2022) confirmed the Government’s proposals to give the Competition and Markets Authority (CMA) enhanced consumer law enforcement powers.
With its new powers, the CMA will be able, for the first time, to decide that a firm has breached consumer protection law and to levy significant fines of up to 10% of global turnover for such breaches. This is a significant change of role for the CMA. Under the current regime, the CMA must take a business to court to prove a breach of consumer law and can only bring about a change in practices by accepting undertakings from businesses who want to avoid court action. The CMA has no current powers to fine businesses for breaching consumer law. The proposed maximum fines are very high (at the same level as fines for breaches of competition law) and considerably tougher than the EU’s New Deal for Consumers, under which most EU Member States are likely to levy maximum fines of 4% of turnover within the relevant Member State.
Details of the UK proposals are set out in Chapters 2 and 3 the Government’s response to the consultation on ‘Reforming competition and consumer policy’. These reforms will be included in the Digital Markets, Competition and Consumer Bill, which is due to be published in draft form in the 2022/2023 Parliamentary session (the Draft Bill). It is not expected to be introduced to Parliament before the 2023/2024 session at the earliest. The Draft Bill will also include other reforms that we have recently reported on, such as reforms to merger control and the regulation of digital markets.
Direct CMA enforcement
Under the enhanced regime, the CMA will have the power to enforce consumer protection laws directly rather than having to go through the courts as explained above. This means that the CMA will be able to issue infringement decisions stating that a business has breached consumer law and impose penalties for such breaches. Currently the CMA needs to prove an infringement of consumer law in court. In practice, the CMA has rarely gone to court, instead preferring to negotiate undertakings with businesses to change their behaviour to avoid a court case. The CMA has not been able to fine businesses for breaching consumer law.
The CMA’s new powers will apply to the “core” consumer protection rules which cut across the economy (such as those relating to unfair commercial practices and unfair contract terms). The Government recognised that it was not necessary or proportionate to empower the CMA to directly enforce the much broader selection of sector- or issue-specific legislation.
With respect to the core consumer protection rules, the CMA will be able to impose fines of up to:
- 10% of global annual turnover for breaches of consumer protection law;
- 1% of global annual turnover for failing to comply with a statutory information request, providing false or misleading information or concealing information; and
- 5% of global annual turnover for breaching any undertaking given to the CMA or direction imposed by the CMA.
CMA decisions which directly or indirectly lead to the imposition of a monetary penalty will be appealable on points of law or fact to the High Court. The High Court will be able to substitute its own decision for that of the CMA, or take any other step that the CMA could have taken, if it concludes that the CMA’s decision was wrong in a “material respect”. Non-fining decisions will only be appealable on judicial review grounds to the Administrative Court.
Enhanced consumer rights
The Government will also make legislative changes to tackle issues such as subscription traps and fake reviews.
With respect to subscription contracts, the Government intends to clarify and enhance existing pre-contract information requirements, require traders to send reminders before a free trial comes to an end or a contract auto-renews, and ensure that consumers are able to exit a contract in a straightforward and timely way. In response to consultation feedback, especially around costs to businesses, the Government will not be taking forward its original proposals to require traders to offer subscriptions without auto-renewal, to obtain the consumer’s explicit consent to continue after a trial period, and to stop charging after a period of inactivity.
To tackle fake reviews, the Government intends to make additions to Schedule 1 of the Consumer Protection from Unfair Trading Regulations 2008, which lists the commercial practices that are in all circumstances considered unfair. It will consult in due course on adding behaviour such as commissioning or incentivising fake reviews and failing to take reasonable steps to check that reviews are genuine.
The Government will also carry out further research in certain areas in which it is not ready to make policy proposals, such as ‘drip pricing’ and paid-for search results, and will investigate whether any consumer laws can be simplified or clarified to reduce the burden on businesses.
The CMA has been increasingly active in consumer law enforcement over the past few years, particularly in the digital sector. It currently lists 15 open consumer enforcement cases on its website, including investigations into anti-virus software, online reviews, social media endorsements and greenwashing. The proposed new powers will give the consumer law regime considerably more ‘teeth’ and businesses will want to consider their consumer law compliance in advance of the new regime.