Rogue online sellers up against new UK consumer-protection weapon

What are the new powers granted to the UK’s Competition and Markets Authority (CMA) to combat rogue trading in the digital arena?

The key takeaway

The CMA has acquired new EU-derived powers under the new Consumer Protection (Enforcement) (Amendment etc.) Regulations 2020. These allow it to seize control of the accounts of rogue traders on eBay, Amazon and other e-commerce accounts, and even their entire websites, if it thinks “consumer interests” are being harmed.

The background

There has been a long history of campaigns from the CMA for its consumer-law powers to be bolstered through the statute books, which has grown broader and deeper over time. The CMA has routinely warned in recent years that several business sectors are hurting consumers. Its end goal is a sweeping overhaul of its consumer-law powers, as proposed to the Government early last year. 

The guidance 

The new Consumer Protection (Enforcement) (Amendment etc.) Regulations 2020 came into force on 2 June 2020 and entered UK law as a result of changes made at EU level. Effectively, the new rules will give the CMA a formal means to require the removal of a website or certain pages, apps or social-media posts when the traders implicated are not willing to cooperate.

Anything considered an “online platform” is up for seizing under the Regulations, which comprises “any software, including a website, part of a website or an application, that is operated by or on behalf of a trader, and which serves to give consumers access to the trader’s goods and services”. This could potentially apply to the biggest to the smallest e-commerce platforms. 

Anything deemed to “harm the collective interests of consumers” known as a “community infringement” could elicit the CMA to seek an “online interface order” (OIO). Community infringement covers any type of infringement that cuts across consumers’ interests, including unfair terms, misleading information or unfairly refused refunds. People and companies targeted by OIO’s could be forced to delete their websites or parts of them, disable or restrict access to them, display a warning to consumers, or even transfer an entire domain name into the CMA’s control, should they be deemed used for ill purposes. 

However, whilst the UK’s regulatory armoury may seem relatively unparalleled, there are judicial constraints that could blunt their edge. In order to safeguard the public from misuse of the new powers, the CMA will have to apply to a court and convince a judge that there is no other way to stop a rogue trader apart from seizure and/or deletion of their website or online sales accounts.

While the regulator would only resort to an OIO where it is deemed that there is no other available or proportionate way to deal with an infringement, the two-step process that requires the enforcer to seek approval of an OIO from UK court judges could hinder their use. 

Why is this important?

Consumers should be able to trust online markets, and this newfound power will strengthen protection by allowing the CMA to remove online content when it threatens consumers’ interests. Given the current debates about the imposition of a vague “duty of care” on platforms, it is reassuring to see an approach centred on judicial oversight, in the form of a court order. This should give confidence to a platform on the receiving end of one of these orders that the action they are being compelled to take has received a reasonable degree of independent scrutiny. 

Any practical tips?

Some bigger companies see the new measures as aiming at smaller e-commerce sites that might not have an established cooperative dialogue or mature compliance policies with which to effectively police sellers. Nevertheless, such wide application may make bigger platforms nervous too, as the new rules could make for a resource-sapping new headache for platforms which are already facing increasing scrutiny under the regulatory microscope.