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UK Government proposes to give the CMA significant new consumer law powers including the power to fine businesses of up to 10% of global turnover

  • United Kingdom
  • Commercial agreements
  • Competition, EU and Trade
  • Consumer

28-04-2022

Reforming Competition and Consumer Policy  - Government Response to Consultation

On 20 April 2022, the Government published a response to its July 2021 consultation “Reforming Competition and Consumer Policy”. What seems clear is that the Government response is designed to provide concentrated reforms to the UK’s existing consumer law framework in order to continue responding to evolving consumer markets — in particular, the rapid uptake of digital commerce. In addition, it appears to have provided the Government with an opportunity to show its intent to “seize the opportunities of our position outside the EU”, “implement laws that work better for the UK” and adopt a “more agile way than the EU”.

Whilst the consumer law changes being proposed by the Government highlight several areas for reform, the most critical change is the enhanced consumer law enforcement regime outlined by the Government. This briefing details the key enforcement powers which have been proposed by the Government, which would seek to provide a further means of protecting consumers from breaches of consumer law going forward.

Enforcement

From a general consumer law perspective, the most significant development proposed following the July 2021 consultation is the reform of the system of enforcement of consumer law.  In its response, the Government confirms its intention to provide the Competition and Market Authority (“CMA”) with the power to directly enforce consumer protection law, determine whether an infringement of certain consumer protection laws has occurred, and make appropriate directions and issue fines for breaches of consumer law. The enhanced enforcement powers of the CMA under the proposed legislation include:

  • the power to fine businesses up to 10% of their global annual turnover for breaches of consumer law;
  • the power to impose penalties of up to 5% of a business’ global annual turnover for non-compliance with undertakings given by an enforcement subject, or a direction imposed by the CMA (with an additional daily penalty of 5% daily global turnover while non-compliance continues); and
  • the power to impose penalties of up to 1% of a business’ global annual turnover for non-compliance with a statutory information request, or where the business has provided false or misleading information in response to an information request, or has concealed, destroyed, or falsified information or documents (with an additional daily penalty of 5% daily global turnover while non-compliance continues).

The CMA will also be empowered to fine individuals in similar circumstances. It is proposed that these fines would range from £30,000 to £300,000 — with the CMA reserving the right to issue additional daily penalties where non-compliance continues.

Other proposed changes to the enforcement regime include: (1) introducing a suite of civil financial penalties that the civil courts would be able to impose; (2) introducing a statutory duty of expediency (to apply across the CMA’s responsibilities); and (3) working with the Ministry of Justice, regulators, consumer advocates, ADR providers, consumer enforcement bodies and businesses to ensure ease of access, and improving oversight and the quality of Alternative Dispute Resolution for consumers.

Commentary

It is important to appreciate the proposed reforms have only been detailed in broad strokes rather than in their draft form. As a result, the Government's response to the consultation does not provide enough substance to advise on the specific legal requirements or impacts the reforms will have on businesses or consumers, albeit there are still several key takeaways.

The CMA’s proposed new direct powers to enforce consumer law and issue potentially stringent penalty fines to businesses of up to 10% of their global annual turnover would introduce, for the first time, ‘GDPR style’ fines for breaches of consumer law. Under the reforms, the CMA would be empowered to directly determine breaches of consumer law and quickly act to bring those breaches to an end. How enthusiastically (and to what degree) the CMA would choose to exercise such enforcement powers remains to be seen. However, if implemented, businesses will no doubt need to carefully consider their compliance obligations with regards to the existing, and where relevant, updated consumer law protection framework.

We look forward to providing further insight and analysis in due course following the publication of the new draft legislation by the Government at a later date.