UK set to reform consumer protection legislation and its competitive regime
What is happening?
The UK is set to introduce a wide array of changes to its consumer protection legislation and competition regime. The focus of the changes revolves around giving greater protection to consumers over subscription traps, tackling fake reviews and improving enforcement. The latter is likely to bring in GDPR/competition law-level fines for breaches of consumer protection legislation or non-compliance with the CMA's investigations or remedies, with maximum fines of up to 10% of global annual turnover.
Why does it matter?
Following a Green Paper published in 2018, the UK Government launched a consultation into potential reforms of its consumer protection laws and its competition regime. The Government recently published its response to the consultation's findings on 20 April 2022 (the Response), which sets out its legislative agenda.
The Response sets out a very comprehensive set of reforms across four main focus areas.
Reform of subscription rules
The Government has identified that 'subscription traps' (ie subscriptions that automatically renew) are of concern, so the new rules will:
- clarify and enhance existing pre-contract information requirements for subscription contracts
- introduce a specific requirement on traders to send reminders to consumers before a contract rolls over or auto-renews onto a new term
- create a specific obligation requiring traders to remind consumers that a free trial or low-cost introductory offer is coming to an end, and
- create a specific requirement for traders to ensure their consumers are able to exit a contract in a straightforward and timely way.
Combatting fake reviews
Fake reviews have been on the Government's radar for some time, so the Response looks to introduce further commercial practices to its list of automatically unfair business practices in Schedule 1 of the Consumer Protection from Unfair Trading Regulations 2008. These include:
- commissioning or incentivising any person to write and/or submit a fake consumer review of goods or services
- hosting consumer reviews without taking reasonable and proportionate steps to check they are genuine, and
- offering or advertising to submit, commission or facilitate fake reviews.
Consumer law enforcement powers
The Response outlines a new enforcement regime and how the CMA is set to take on the role of direct enforcer going forward in relation to consumer protection legislation, allowing the CMA to independently decide on infringements, actions or remedies without having to seek a court order (as is the position currently). The new legislation will also introduce new GDPR+/competition law level fines for breaches of consumer protection legislation or non-compliance with the CMA's investigations or remedies. The CMA will have the power to:
- determine whether there have been breaches of consumer protection legislation and to issue fines of up to 10% of businesses' global annual turnover for any breaches, which aligns with the CMA's powers under the competition regime
- impose penalties of up to 5% of businesses' global annual turnover for non-compliance with undertakings made to, or directions ordered by the CMA, and an additional daily penalty of 5% of daily global turnover if any non-compliance continues, and
- issue penalties of up to 1% of businesses' annual global turnover for any failure, without proper reasons, to comply with a statutory information request, or if any false or misleading information has been provided, an additional daily penalty of 5% of daily global turnover if any non-compliance continues.
Reform of the competition regime
The Government's view is that the current competition regime could be more effective, so the Response looks to address this through a number of changes, including:
- more flexibility for the CMA in market investigations – this includes in relation to defining the scope of market investigations, accepting binding commitments at any stage in market studies and investigations, requiring businesses to trial remedies and also amending remedies in the ten years following an adverse effect on competition finding
- changes to the CMA's jurisdiction over mergers – a new threshold will be introduced to help protect against 'killer acquisitions' by enabling the CMA to review acquisitions where the acquirer has: (i) an existing share of supply of goods or services of 33% in the UK or a substantial part of it; and (ii) a UK turnover of £350m. The current financial threshold of £70m UK turnover is to be increased to £100m. For small mergers, there will be an exception from review by the CMA where each of the parties has UK turnover of less than £10m
- expanding and strengthening the CMA's investigation and enforcement powers under the competition regime – the Government is also set to introduce changes to the CMA's evidence gathering and enforcement powers for failure to comply with the CMA's investigative measures and for breach of commitments, undertakings and other obligations and changes to the currently under-utilised interim measures regime. The jurisdictional reach of the UK's prohibition on anti-competitive agreements will also be clarified to cover those with an effect in the UK but implemented in another jurisdiction.
The Queen's speech in May 2022 set out the Government's intention to publish a draft Digital Markets, Competition and Consumer Bill in the current Parliamentary session and the Government has subsequently reconfirmed its intention to then legislate when parliamentary time allows.
What action should you consider?
Compliance with consumer regulation has never seemed to be more important in light of the proposed changes. The new regime puts the onus on retailers to ensure compliance with the new regulations, which will be more onerous than previously. Therefore, retailers may want to consider:
- ensuring that you are taking all the steps you can to comply with the new subscription rules if you offer any subscription services to consumers
- taking any requisite steps (i) to ensure that all reviews hosted on your websites/networks are legitimate, (ii) not to incentivise or commission fake reviews from other parties, and
- ensuring compliance with the new consumer regulations generally, as the new teeth that are set to be given to the CMA will be sharp and potentially bite hard in the event of breaches of the regulations or non-compliance with the CMA's investigations or remedies.
62% of consumers questioned believe that they saw at least one fake online review in 2021 (The Local Consumer Review Survey, BrightLocal SEO platform).
We'll be discussing this issue and more at our Retail Compass Live! event on 30 November. To see more and to register, visit the Retail Compass Live! events page.