Collective actions under consumer law: proposed amendments to the Digital Markets, Competition and Consumers Bill

The question

Are class actions under consumer protection law likely following the UK’s new DMCC Bill, and if so, what will the impact on businesses be?

The key takeaway

Proposed amendments to the Digital Markets, Competition and Consumers Bill (the DMCC Bill), which would allow collective actions to be taken for breaches of consumer law, are back on the cards after initially being rejected by the House of Commons. Traditionally, such claims were not allowed, and those wishing to bring a class action for a breach of consumer law have had to find ways of disguising it within competition law. During the DMCC Bill’s second reading in the House of Lords, several peers voiced concerns that prohibitive costs and the complexities of digital law exclude consumers from seeking redress on an individual basis, leaving them with little recourse for breaches of their consumer rights. In light of this, Parliament is once again considering whether the consumer law regime should allow for collective action, mirroring that of competition law.

The background

The DMCC Bill aims to enhance consumer protection in digital markets by reducing anti-competitive practices. It will apply to digital firms that are deemed to have “strategic market status” (SMS) in the UK, defined as “firms with substantial and entrenched market power, in at least one digital activity, providing them with a strategic position”. We discussed the implications for SMS companies in our our Winter 2023 Snapshots.

The new law seeks to increase the rights of consumers and empowers regulatory bodies in their ability to uphold safeguards. Notably, it equips the Competition and Markets Authority (CMA) with increased powers to enforce consumer law in parallel with its existing powers to enforce competition law. As a result, the DMCC Bill makes it more likely that companies will face substantial penalties, if found to be in breach of consumer law, with fines of up to 10% of global turnover and/or court proceedings as a result.

An amendment to the DMCC Bill was proposed in November 2023 by Former Lord Chancellor the Rt Hon Sir Robert Buckland MP, with support from several Conservative MPs. The amendment sought to expand the scope of the collective action regime in the Competition Appeal Tribunal (CAT) to also include consumer protection claims in line with those brought for breaches of competition law. This development is expected to significantly change the landscape of UK class actions, putting business-to-consumer companies, irrespective of their market size, at risk of large-scale collective actions.
Previously, the proposed amendment to the DMCC Bill was not officially backed by the Government and failed to pass in the House of Commons. On this basis, it seemed unlikely that consumer law claims would succeed as collective actions unless they could be camouflaged under the existing competition law regime.

The development

On 5 December 2023, the DMCC Bill was read for a second time in the House of Lords. During the reading, several peers indicated support for a collective action regime for claims under consumer law.

The Former Master of the Rolls and Head of Civil Justice, the Rt Hon Lord Etherton KC, argued that the DMCC Bill was not fit for purpose because there was no provision enabling consumers to make collective redress claims where multiple parties have been harmed by the same breach. Instead, consumers are required to bring claims on an individual basis before the small claims courts or through settlements with the CMA. This disincentivises companies from complying with their obligations, as individual consumers and small businesses often lack the resources to finance such proceedings.
Baroness Kidron furthered concerns, pointing out that digital is a complex area of law which requires technical knowledge to understand exactly which law is being broken and to prove the wrongdoing in question. Several other peers also called for provisions in the DMCC Bill for a collective actions regime, borrowing, where appropriate, from that which already applies for breaches of competition law. The DMCC Bill is now at the report stage in the House of Lords. It must go through a third reading before it reaches the final stage, whereby both Houses will consider the amendments together.
A turning tide on collective action for consumer claims can also be evidenced by the willingness of the CAT to certify collective actions which do not immediately appear to fall within competition law. Additionally, amendments have already been made to the DMCC Bill which seek to soften the impact of the Supreme Court’s recent decision on the status of litigation funding agreements in collective actions.

Why is this important?

Although not yet passed, the proposed amendment to the DMCC Bill indicates that the expansion of the collective action regime to consumer law claims is firmly back on the agenda. The DMCC Bill will mark the most substantial reform of UK competition and consumer protection legislation in many years, and every business based or active in the UK is expected to be impacted to some degree.

Any practical tips?

Businesses with significant market shares whose operations require direct consumer engagement should remain alive to the risk of litigation, given the ongoing evolution of the regulatory landscape. They must stay updated on the progression of the DMCC Bill and look out for public consultations on guidance, especially in relation to consumer protection, competition law and mergers. In particular, companies should consider their strategies regarding sales and marketing in anticipation of the enhanced authority of the CMA to levy substantial penalties for violations of consumer law.

Spring 2024