New era for UK consumer protection

The new Digital Markets, Competition and Consumers Bill will, according to the government, “crack down on rip-offs, protect consumer cash online and boost competition in digital markets”.  

On the consumer side, there are some significant proposed developments for anyone doing business with UK consumers which will substantially increase the risks, and financial exposure, for traders and advertisers for breach of consumer protection laws.

The Competition and Markets Authority (‘CMA’) will, for the first time, be able to award compensation to consumers and directly impose financial penalties for breach of consumer protection laws. There are some hefty potential fines of up to 10% of global annual turnover (or 3% for breaching undertakings given to the CMA; or 1% for failing to provide information to the CMA, or concealing or providing false information).  

Consumers will still have a right to damages for financial loss, distress or physical inconvenience or discomfort arising from entering into a contract with a trader by reason of a prohibited practice.

There are proposed new laws, following a consultation, against fake reviews, including 

• prohibiting the commissioning of someone to write a fake review;
• posting consumer reviews without taking reasonable steps to check they are genuine; and 
• offering or advertising to submit, commission or facilitate fake reviews.

‘Subscription traps’, in which businesses make it difficult to exit a contract, will also be stopped. 

Businesses will have to provide clearer information to consumers before they enter a subscription contract; issue a reminder to consumers that a free trial or low-cost introductory offer is coming to an end, and a reminder before a contract auto-renews onto a new term; and ensure consumers can exit a contract in a straightforward, cost-effective and timely way.  There is also a new insolvency protection requirement for any business operating a consumer savings scheme. 

The Bill ‘cuts and pastes’ existing consumer protection law from The Consumer Protection from Unfair Trading Regulations 2008 (including the prohibition on misleading acts, omissions and aggressive trade practices), with a very similar list of banned practices (with tweaks in some of the wording, notably a new prohibition on false claims that a product “is able to modify a person’s appearance”). 

Interestingly, the CMA is also given powers to apply for ‘online interface orders’ and ‘interim online interface orders’, if the CMA considers that a person has engaged, is engaging or is likely to engage in a prohibited commercial practice.  Such an application can be made against the trader or any other person (such as the platform on which the trader is operating) if there are no other available means of bringing about the cessation or prohibition of the infringement which, by themselves, would be wholly effective, and it is necessary to make the order to avoid the risk of serious harm to the collective interests of consumers. 

An online interface order is an order that directs the person against whom it is made to do, or to co-operate with another person so that person can do, any of the following: remove content from, or modify content on, an online interface; disable or restrict access to an online interface; display a warning to consumers accessing an online interface; or delete a fully qualified domain name and take any steps necessary to facilitate the registration of that domain name by the CMA.  An ‘online interface’ means any software, including a website, part of a website, an application or other digital content which is operated by a person acting as a business, or in the name of, or on behalf of, that person; and is operated for or in connection with the purposes of giving access to, or promoting, goods, services or digital content that the trader or another person supplies.

Whist the ASA is not directly impacted by this Bill (although separately its role in the regulation of online advertising is currently under review), it is likely to result in greater scrutiny of, and challenge to, ASA rulings, given the much greater potential downside to advertisers under the Bill of having been found to have misled consumers.  

The UK will be entering a new era for consumer protection, for which all businesses will need to be prepared.