Corporate: Bill gives CMA consumer enforcement powers

New laws to protect consumers, and a turbo-charged Competition & Markets Authority (“CMA”) to enforce them are proposed by the Digital Markets, Competition and Consumers Bill, now making its way through Parliament. It proposes wide ranging changes to competition law, digital markets and in consumer protection – the last of which we will consider here.

CMA enforcement powers 

Under the bill, the CMA will gain the power to directly impose financial penalties and enforce consumer laws as it does with competition law. The aim is to allow it to act faster and take on many more cases, providing a deterrent to businesses. The new model will allow the CMA (not the courts) to decide at first instance if consumer laws have been breached, and impose penalties. New penalties are proposed if entities frustrate investigations (e.g. by failing to comply with a CMA information request); fines will be at a level comparable to the ICO – for example a penalty of £300,000 or 10% of global turnover, whichever is higher, for engaging in commercial practices that breach consumer protection laws. 

The CMA would first give a provisional infringement notice; a final notice would be appealable to the Outer House for Scottish matters and the High Court in England & Wales or Northern Ireland.

Subscriptions

The bill proposes many provisions to protect consumers from subscription traps, creating a definition of “subscription contract” (contracts such as electricity and gas are excluded). Its provisions apply to contracts with a free or reduced price trial period after which the consumer pays more. Some headline requirements include:

• Key information. This will have to be provided prior to contract, separately from the “full pre-contract information” (below), with no steps required to be taken by the consumer in order to read it.
• Full pre-contract information. Also to be provided separately prior to contract, this information is similar to that required under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (“CCR”).
• Auto-renewal reminders. An easy to use process is to be put in place to remind consumers of their rights to exit. The bill proposes set deadlines for reminders, such as for the first renewal payment due and subsequently every six months.
• Cooling-off rights. In addition to the existing cooling-off period, a “renewal cooling-off” period is proposed, for 14 days from the date of a “relevant renewal”. This includes the route to obtain a refund (and does not include some of the CCR protections such as a requirement to return the goods before the refund is due).
• Simple (and single) process to cancel. Consumers are to have an easy and accessible means to end the contract, via one single communication. Consumers must not be required to take unnecessary steps to end the contract, for example if they signed up at the click of a button, they should not have to do something more onerous like going through a call centre or filling in a form. Guidance notes that an online account interface or clicking a cancel button can count as a communication. The bill does not provide that this cancellation right must be free – only that overpayments are to be refunded. 

Fake reviews and the CPUTs 

The bill doesn’t (yet) contain a prohibition of fake reviews, but the Government is consulting on this. It repeals, but then largely recreates with amendments, the Consumer Protection from Unfair Trading Regulations 2008, and allows the Government to increase the blacklist of banned practices (such as by adding fake reviews) through secondary legislation. One amendment includes a new offence of omitting material information from an invitation to purchase – this will be considered an unfair practice in all circumstances. The bill outlines what is considered to be an average consumer, and some of the ways in which a group of consumers could be considered vulnerable. This could result from “circumstances”: under the guidance, this could potentially comprise being in mourning or going through a divorce. 

Saving schemes: insolvency protection

The bill creates requirements for schemes such as Christmas savings clubs. Traders will be legally obliged to protect payments under a scheme through trust or insurance, so the consumer can receive a full refund in the case of the trader’s insolvency.

Alternative dispute resolution 

The bill proposes requirements on those seeking to act as ADR providers, including submission to an accreditation scheme and a prohibition on charging fees where the provider is not permitted to do so. Businesses will already be familiar with the requirement to notify consumers of any relevant ADR; this is restated in the bill.

Comment

The Bill is at an early stage, but is not expected to face too much difficulty as it progresses. It seems likely to come into force next year. Businesses should review their marketing, terms and conditions, and customer journey, to ensure they can meet the bill’s requirements and avoid the ire of the amped-up CMA.