Fake it till you make it? The Government says no more to fake reviews plus tightens up on subscription models
The UK Government has confirmed that new consumer rules will come into force to "shield the public from rip-offs and boost competition".
The UK Government has confirmed that new consumer rules will come into force to "shield the public from rip-offs and boost competition". Although not confirmed when these will be introduced, the top three issues on its hit list are fake reviews, "subscription traps" and prepayment schemes.
Fake reviews will be targeted by laws that have a three-pronged approach. The proposals include making it against the law for: (i) businesses to commission a third party to write or submit a fake review; (ii) for individuals to offer or advertise to submit a fake review; and (iii) to displays reviews without taking reasonable steps to ensure that those reviews are genuine. There will also be a clamp down on "subscription traps" where businesses typically make it hard for consumers to exit a contract. Instead, businesses will be obliged to provide clear information before a consumer enters into a contract, issue reminders about the end of any free trials and auto renewal dates and make sure consumers can end contracts in a straightforward way. Members of schemes such as Christmas clubs will also have their money safeguarded (either by insurance or trust), as it is not otherwise protected by the UK's Financial Services Compensation Scheme.
The new rules will be reinforced by the enhancement of the CMA's powers where the CMA can directly enforce consumer law replacing the need for consumers to go to court. Businesses should be particularly alive to the CMA's proposed new headline financial penalty where the CMA would be able to issue a penalty of up to 10% of global annual turnover for breaking consumer protection law – this percentage is then stepped down to 5% and 1% for lesser offences. Fines of up to £300,000 can also be brought against individuals who breach the laws.
The Government reported that the average UK household spends around £900 each year influenced by online reviews and spends £60 on unwanted subscriptions. The launch of these proposals coincides with the cost-of-living crisis and consumers may be grateful for the tightening up of the rules around subscriptions, in particular the notification reminders. For businesses who are subscription-based or whose products are sold in an extremely competitive market and therefore rely on review-based sales, the new regulatory requirements may prove a challenge, including the cost from a compliance perspective and the potential drop off in revenue. While some retailers may have historically profited from engaging with (or at least not preventing) behaviours which are based on slacker consumer habits (for example, not keeping an eye on their subscriptions), it is clear that businesses will now need to adjust their practices.
The British Retail Consortium has questioned the practicality of enforcing the new laws, in particular in proving a breach regarding fake reviews. Although the evidentiary process has not yet been clarified, it is certain that retailers will need to do more in managing and monitoring their review processes. At a time when retailers, consumer brands and hospitality providers are experiencing cost increases in their supply chains, raw materials and elsewhere, the new rules also mean potentially further increased costs as it is likely that, in order to comply, businesses will need to update terms and conditions, enhance consumer communications, pay for insurance of prepayment schemes and invest more in human resources in order to take reasonable steps to ensure reviews are genuine.