Global menu

Our global pages

Close

UK Government proposes key changes to UK consumer law including significant new consumer law powers for the CMA

  • 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”.

The key consumer law reforms being proposed by the Government in its response are:

  1. Subscription traps;
  2. Fake Reviews; and
  3. Enforcement

Subscription traps

It is the Government’s intention to introduce new laws requiring changes to current subscription rules, including:

  • ensuring the pre-contract information given to consumers entering into subscription contracts is ‘enhanced’ to ensure consumers  understand the contract they are entering into;
  • requiring traders to specifically remind consumers before the subscription auto-renews or rolls over onto a new term;
  • creating a specific obligation on traders requiring them to remind consumers when a low-cost introductory offer or free trial is coming to an end on their subscription; and
  • requiring traders to ensure their contracts can be exited in a straightforward, cost effective and timely way by their consumers.

It is proposed that regulated sectors where equivalent or higher rules for subscription contracts already exist (e.g. water, gas, and electricity providers, financial services and insurance within the scope of the Financial Conduct Authority, and for certain medical products and medicine) will be exempted, or largely exempted, from these changes.

Fake Reviews

In an effort to tackle reviews that deliberately mislead consumers to benefit a trader, the Government intends to rely on its delegated legislative powers to amend Schedule 1 of the Consumer Protection from Unfair Trading Regulations 2008 and add the following business practices to the list of automatically unfair practices:

  • hosting consumer reviews without the business taking proportionate and reasonable steps to confirm if they are genuine;
  • advertising or offering to submit, commission, or facilitate fake reviews; and
  • incentivising or commissioning any person to write and/or submit a fake consumer review of goods or services.

Enforcement

From a general consumer law perspective, one of the most significant developments being 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.

Other proposed consumer law reforms

  • Repayment schemes (for example, Christmas Savings Clubs), which are marketed or generally understood to be for the purposes of acting as a savings mechanism and not currently subject to existing financial protections, must fully protect customer payments by insurance or way of trust—subject to certain exclusions.
  • The Government also intends to update and streamline the Package Travel and Linked Travel Arrangement Regulations 2018, to allow for easier enforcement and compliance with the law by businesses, better provisions for protection in cases of insolvency for non-flight packages and enabling for better information and guidance to be made available by the Department for Business, Energy and Industrial Strategy.

Finally, the Government has committed to continue to review other areas for consumer protection including ongoing research on the potential harms to consumers stemming from (1) ‘drip pricing’; (2) paid-for search results that are not labelled accordingly; and (3) rogue traders.

Commentary

The proposed reforms are currently only available in the high-level format provided by the Government in their response to the July 2021 consultation. However, even at this early stage, a few key observations can be made.

Firstly, we anticipate businesses in the UK welcoming the Government’s proposed targeted changes to the existing consumer protection law framework. The areas identified mark the Government’s attempt to give clear parameters and guidance in relation to how companies should approach compliance in highlighted spheres of reform (e.g. regarding subscription traps, fake reviews, etc.) rather than the current broad catch-all provisions which may have left traders feeling unclear. Secondly, these reforms are not, necessarily, one off changes in a largely static system. In its response, the Government has committed to continuing to examine and propose new reforms where it believes necessary to best protect consumers located in the UK, and respond in an agile way to future developments in the market.

Finally, an area which may give rise to concern from businesses is the CMA’s new direct powers to enforce consumer law and issue potentially stringent penalty fines to businesses. These fines could be up to 10% of a business’ global annual turnover and will introduce for the first time ‘GDPR style’ fines for breaches of consumer law. 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.

Beyond the above points, any further analysis must be reserved until the draft legislation is published and available for review—at which stage further meaningful commentary can be issued.