UK set to reform consumer protection legislation

The question

How is the UK likely to change its consumer protection laws in the future and just how serious will the fines be for failing to comply?

The key takeaway

The UK is set to introduce a wide array of changes to its consumer protection legislation, in effect mirroring the consumer protection developments sweeping across Europe now the EU’s new Omnibus Directive has come into effect (May 2022). The focus of the changes revolves around giving greater protection to consumers over subscriptions, tackling fake reviews and improving the regime for the enforcement of consumer protection legislation. The latter Is likely to bring in GDPR-level fines for breaches of the laws or non-compliance with the CMA, or rather “GDPR plus” level fines, many ranging from 5%-10% of daily or global annual turnover. It follows that it’s imperative that businesses understand their obligations and start getting ready to comply with them. 

The background

Following a Green Paper published in 2018, the UK government launched a consultation into potential reforms its consumer protection laws. The consultation sought stakeholders’ views on three main themes:

• promoting competition to drive enterprise, innovation, growth, and productivity – a more active pro-competition strategy, rebalanced merger controls, stronger enforcement against anti-competitive conduct, and cross-cutting reforms to the Competition and Markets Authority’s (CMA) powers
  
  
• updating consumer rights to keep pace with markets – a series of reforms to benefit consumers by tackling subscription traps, improving the consumer experience in online shopping, and better prepayment protections
  
  
• strengthening the enforcement of consumer law by individuals and regulators – changes to support individuals resolving their own disputes and strengthen state enforcement powers and delivering better guidance and support for businesses to comply with their obligations.

Following an array of responses during the consultation period, the government recently published its response to the consultation’s findings on 20 April 2022 (the Response), which sets out its legislative agenda in relation to consumer protection laws. 

The development

The Response sets out a very comprehensive set of reforms across the three main focus areas above. This includes expanding existing consumer protection legislation to give consumers enhanced protections against various predatory practices. 

Reform of subscription rules

The government has identified that subscription traps (ie subscriptions that automatically renew) are of concern, so the new rules will tackle these issues. 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 is set to introduce further business practices to its list of automatically unfair business practices in Schedule 1 of the Consumer Protection from Unfair Trading Regulations 2008. The new unfair practices 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 enforcer going forward in relation to consumer protection legislation. The new legislation is also set to introduce new GDPR-level fines for breaches or non-compliance with the CMA, enabling it to:

• 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
• issue fines of up to 10% of businesses’ global annual turnover for breaches of consumer protection legislation, and
• impose penalties of up to 5% of businesses’ global annual turnover for non-compliance with the CMA’s undertakings or directions, and an additional daily penalty of 5% of daily global turnover if any non-compliance continues.

Why is this important?

The GDPR-level fines (or rather the “GDPR plus” level fines) show that the UK government is intent on enforcing existing and future consumer protection legislation and the new tools will enable the CMA to take a much more proactive approach in the investigation and enforcement of consumer protection matters. 

Any practical tips?

Compliance with consumer regulation has never looked more important. If your business is engaged in any form of subscription products or consumer reviews, then you better get busy ensuring you’re taking all the steps you can to ensure compliance. And remember, in the EU, the Omnibus Directive has already landed, so many of these preventative measures are already in play within EU member states. It’s time to approach consumer compliance in the same fashion as GDPR compliance – or you could find yourself looking down the barrel of a very big regulatory gun.