New consumer protection law announced

Following the Government’s 2021 Consultation Paper on potential new consumer protection reforms (which we discussed in a previous article), the Government has, on 20 April 2022, announced significant reforms to consumer protection laws in the UK and provided a response to the consultation. These reforms mostly align with the position taken in the consultation paper; however, in response to feedback received as part of the consultation, not all of the consultation proposals have made the final cut. The reforms are not yet effective: no draft legislation has been published, and of course, the usual parliamentary approval process will apply before any draft legislation becomes law.

The consumer protection aspects of the reforms address:

• Fake reviews;
• Subscription traps; and
• Enforcement.

Fake reviews

• The new law will prevent businesses hosting consumer reviews without taking reasonable steps to check they are genuine.
• Commissioning somebody to write or submit a fake review will be prohibited.
• It will be forbidden to offer or advertise to submit, commission or facilitate fake reviews.

The Government intends to use its delegated legislative power to add these business practices to the list of automatically unfair practices in Schedule 1 of the Consumer Protection from Unfair Trading Regulations 2008.

Subscriptions

• The new law will require businesses to ensure that consumers can exit a contract in a straightforward, cost-effective and timely way.
• Businesses will need to provide clearer and enhanced information to consumers before they enter a subscription contract.
• Businesses will be obliged to remind consumers before a free trial or low-cost introductory offer comes to an end, and before a contract auto-renews onto a new term.

However, the reforms will not, following the responses to the Government’s consultation, explicitly require traders to:

• offer consumers the choice whether to take the subscription without auto-renewal;
• before the end of a free trial or low-cost introduction offer, obtain the consumer’s explicit consent to continuing the subscription after the free trial or low cost introductory offer period ends;
• after a reasonably long period of time where there is evidence of inactivity, give notice of suspension of service and stop charging money for the consumption or use of goods, services, and digital content under a subscription contract.

Subscriptions within regulated sectors (i.e. financial services, insurance, gas, electricity, water and the supply of medicine) will be exempt or largely exempt from the above requirements.

Enforcement

• The Competition and Market Authority (“CMA”) will be able to directly enforce consumer law with new powers to fine businesses up to 10% of global turnover for consumer law breaches. This reflects the position proposed in the Government’s 2018 Modernising Consumer Markets Green Paper and in the 2021 Consultation Paper. The CMA will also be able to impose additional daily penalties for continued non-compliance and penalties on businesses of up to:
  • 5% of a business’ annual global turnover for breaching undertakings given to the CMA; and
  • 1% of a business’ annual global turnover for non-compliance with an information notice, concealing evidence or providing false information.
• As an alternative, the CMA will be able to fine individuals instead of businesses (for example, by imposing a fine of up to £300,000 for a breach of consumer law).
• There will be changes aimed at improving the quality and oversight of Alternative Dispute Resolution (ADR) services in consumer markets.
• It will be easier for the CMA and other UK regulators to disclose information overseas (such as to international regulators), with the intention of improving investigations.
• There are plans to introduce a statutory duty of expedition for the CMA, to ensure that decision-making is swift and to provide certainty for businesses.

Other consumer protection measures

• The Package Travel and Linked Travel Arrangement Regulations 2018 (which we explored in a previous article) will be amended to allow for easier enforcement and compliance with the law by businesses, better flexibility for insolvency protection for non-flight packages and to enable BEIS to improve the quality of information and guidance available.
• Prepayment schemes like Christmas savings clubs (which are not within the scope of existing financial protections) will be required to fully safeguard customers’ money through insurance or trust accounts.

The Government will also seek further evidence on how best to help regulators tackle other bad practices aimed at consumers online (e.g. ‘dark patterns’ that manipulate consumers into spending more money, and ‘sludges’ – negative nudges such as when businesses add on extra charges for a product before checkout, on top of the advertised price). This suggests that such practices will not be covered in the draft legislation.

CMS comment

Today’s announcement, on 20 April 2022, is in the form of a press release (which received widespread press pick-up) and a response by the Government to its consultation paper. It lacks sufficient detail to enable a proper assessment of the impact and requirements on businesses, and no draft legislation is yet available. We, therefore, eagerly await the publication of the draft legislation to see how these proposals would be implemented in practice.

New rules allowing the CMA to directly enforce consumer law (with fines up to 10% of a business’ global turnover for consumer law breaches) and giving the CMA a statutory duty of expedition would clearly significantly impact business’ compliance approaches with regards to consumer protection law. It means that the CMA would be able to determine breaches of consumer law without any prior judicial scrutiny, and more quickly than it does currently. It would undoubtedly expedite the sanction process for the CMA, as going through a court process takes significant time, but this could be at the expense of impartiality. The CMA often seeks to push the boundaries of consumer protection law and already manages to obtain undertakings from businesses which oblige the relevant businesses to go beyond the current consumer protection regime.

For further information on this or any consumer law issue, please do not hesitate to contact one of our specialists.