Background
Every year, consumers fall victim to unavoidable ‘hidden’ fees amounting to around £2.2 billion. Following a consultation into consumer transparency, the Government is introducing new laws to ban fake reviews and hidden online charges in order to improve transparency around pricing and better protect consumers from deceptive trading practices online. This forms a part of wider consumer law reforms which will be introduced by the Digital Markets, Competition and Consumers Act 2024 (DMCC Act).
Fake reviews
Reviews can often play a key role in consumers’ purchasing decisions. In fact, the Government has stated that reviews influence 90% of consumers and contributed to the £224 billion spent on online retail markets in 2022. The DMCC Act has added ‘fake reviews’ to the list of banned practices that are automatically considered unfair in all circumstances. Specifically, the ban covers the following practices:
- publishing consumer reviews or consumer review information without taking reasonable and proportionate steps to either: (i) prevent publication of fake consumer reviews/consumer reviews which conceal incentivisation; and (ii) remove such reviews or information from publication;
- submitting or commissioning another person to submit or write a fake review or concealing the fact that a consumer review has been incentivised;
- publishing consumer reviews or consumer review information in a misleading way.
Whilst the Government has decided against such practices attracting criminal liability, they will be subject to civil liability (see below). The Government will be working hand in hand with the Competition and Market’s Authority (CMA) to produce new guidance explaining the law, and to clarify what ‘reasonable and proportionate” steps businesses are expected to take to comply.
Hidden fees/drip pricing
Drip pricing occurs when consumers are shown an initial price for a product or service before additional fees and charges are revealed later in the checkout process. This practice not only undermines price transparency but also make it difficult for consumers to make an informed decision, especially when comparing between products and services.
In order to tackle this practice, the DMCC Act requires all fixed mandatory charges (e.g. taxes and booking fees) to be included in the headline price otherwise referred to as an “invitation to purchase” to consumers. The existence of any variable mandatory charges (i.e. delivery fees) will also need to be disclosed upfront, along with how these will be calculated.
Optional fees have not been included in the DMCC Act. Certain fees, for example, gift wrapping – are clearly optional and should be distinguished from mandatory fees. However, the Government has previously flagged that in some instances, fees are presented as ‘optional’ but are mandatory in reality. Some examples identified by the Government include:
- toys being sold without the required batteries, which are charged as an optional fee to consumers;
- long-haul flight tickets being sold to consumers without luggage, which is then charged as an optional fee later in the transaction process.
The Government has indicated that it will further consider the practice of optional dripped fees, including proposals to regulate such fees in a proportionate way.
Pricing Displays
In addition, there will be new rules on clear labelling on supermarket shelves, via an update to the Price Marking Order (PMO). The PMO will require traders to display the final selling price, and where appropriate, the final unit price of products in a transparent and consistent manner.
The measures mentioned above aim to enhance transparency and fairness in online shopping, ensuring customers are not misled by deceptive practices.
What should businesses be doing to prepare?
The new regime under the DMCC Act will be implemented through secondary legislation potentially from this Autumn onwards. Consumer facing online platforms and e-commerce sites should be actively considering how their policies and processes may need to be adapted to comply with these new measures to ensure ongoing compliance.
The DMCC Act includes new powers for the CMA to issue infringement decisions for consumer law breaches and impose fines of up to 10% of a company’s global turnover.
If you want to hear more about how we can help you in this space, please get in touch with Richard Hugo or Amanda Leiu.
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