Government consults on reforms to consumer protection law

The question

What are the key proposals set out in the BEIS consultation paper for the reform of UK consumer protection regulation?

The key takeaway

The proposals make it clear that the Government is prepared to strengthen the existing powers of the Competition and Markets Authority (CMA) and empowering consumers to enforce their own rights through alternative dispute resolution without resort to the courts. Such substantive changes are facilitated in part by the UK’s withdrawal from the European Union, prior to which the consumer law regime was harmonised between EU Member States. 

The background

 Reform of certain aspects of consumer law, focusing on protecting consumers online and improving enforcement, has been anticipated for several years. Following numerous papers, reports and consultations, on 20 July 2021 the Department of Business, Energy and Industrial Strategy (BEIS) published a consultation entitled “Reforming Competition and Consumer Policy” (the Consultation).

The development

The Consultation proposes a number of reforms regarding consumer law and policy, including:
Substantive consumer law

• Subscription contracts

– The Government proposes several reforms in this area. Notably companies will need to be obliged to make consumers aware in plain English of all necessary subscription information at: (i) an early stage in the subscription process; and (ii) immediately before placing their order.

– The subscription information will need to include: (i) the order or agreement is for a subscription and not a one-off purchase; (ii) information explaining the minimum contract term and price per billing period; and (iii) any auto-renew/auto-extend provisions and the minimum notice period for cancellation.

• Fake reviews 

– Whilst the consultation notes that there is a growing industry of using fake reviews to mislead consumers, it is noted that reviews by experts or online influencers will not be fake provided they reflect the genuine experience or opinion of the expert or influencer. 

• Preventing online exploitation of consumer behaviour (targeted advertising)

– Although there is evidence of harm from online exploitation of consumer behaviour, including from the Government’s Behavioural Insights Team, the consultation proposes that substantive research should be conducted which sets such practices into the wider context of markets, for example exploring the influence of major players and commerce platforms.

• Reducing red tape while maintaining consumer protection

– The consultation invites views on how it can simplify or clarify consumer law to reduce uncertainty and legal costs for businesses and consumers. 

• Strengthening pre-payment protections for consumers

– The consultation seeks views on amendments in order to protect consumers from the risks of using savings clubs and generally with regard to pre-payment for goods in general. 

Enforcement powers

• The consultation seeks to improve the current enforcement powers of the CMA and introduces a proposal for an administrative enforcement regime. The CMA would be able to impose fines on firms of up to 10% of global turnover.
• Supporting consumer’s right to enforce their own rights through ADR.
• Collective redress regimes, which would allow the CMA and other enforcement bodies to take action on behalf of consumers.
• Looking at how National Trading Standards can assist Local Trading Standards to enforce consumer law.
• What improvements can be made in terms of guidance to businesses, in order that they can better comply with consumer law.

Why is this important?

While reform to the consumer protection regime has been anticipated for a number of years, the growth in e-commerce has accelerated the need for reform in a number of respects. If put into action, the reforms would alleviate concerns surrounding the CMA’s perceived lack of “bite” as highlighted by the Penrose Report and comments of Lord Tyrie (former Chairman of the CMA).

Any practical tips?

Although the reforms are currently housed within a consultation, companies should carefully consider the ramifications of the enhanced enforcement powers of the CMA and begin to think about adapting policies and internal training in order to prepare for any change to consumer protection law.