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The Digital Markets, Competition and Consumers Bill completed its Committee stage in the House of Commons in July, with minor amendments, and now awaits Report. A Carry-over Motion has been agreed so that the Bill will resume in the next session of Parliament in September.
In this article we take a closer look at the changes to consumer law proposed in the Digital Markets, Competition and Consumers Bill (DMCC Bill). Implications for digital markets are considered separately and can be found here.
Background
The DMCC Bill is long-awaited, having been anticipated since a 2018 Green Paper consulting on competition and consumer regulation focussing on making digital markets work better for consumers. Government published a consultation in 2021 covering much of the content of the DMCC Bill, and in response to the consultation confirmed that it planned to progress the proposed changes to law. The DMCC Bill was announced in the Queen’s Speech in May 2022.
Consumer Law Changes
The DMCC Bill aims to create a more level playing field for consumers in the digital economy, and to ensure that they are protected from harmful practices and unfair treatment. Whilst largely replicating the existing landscape for consumer protection from unfair trading, it proposes a range of new measures to protect consumers in the digital economy. Amongst other things, but especially relevant for consumer-facing businesses, the DMCC Bill focuses on addressing the following specific issues:
- Subscriptions: the DMCC Bill targets subscription traps and addresses automatic renewal provisions and lengthy roll-over periods. Businesses must remind consumers when a free trial or low-cost introductory offer is ending. Businesses must also provide clearer information to consumers before entering a subscription contract and allow them to exit in a straightforward, cost-effective and timely way. A 14 day cooling-off period will apply when entering a subscription, and also on any renewal.
- Reviews: the DMCC Bill includes a power for the Secretary of State to add to the current blacklisted practices by way of secondary legislation. The government is consulting on the detail of a proposed ban of commissioning or incentivising fake reviews, hosting consumer reviews without taking reasonable steps to ensure they are genuine, and offering to submit of facilitate fake reviews.
- Prepayment: the DMCC Bill strengthens prepayment protections for consumers using savings schemes not covered by existing financial protections - consumer prepayment schemes marketed as savings mechanisms must fully protect customer payments through a trust or insurance.
Enforcement and Penalties
The DMCC Bill allows for enforcement through the courts and, notably, introduces new direct enforcement powers for the Competition and Markets Authority (CMA) in respect of consumer protection, including the ability to investigate suspected breaches, provide enforcement notices for infringements, breach of undertakings and directions, and to give information notices to anyone who provides it with false information.
The fines which can be levied by the CMA are significant, with the maximum penalty being £300,000 or, if higher, 10% of the target’s turnover. Turnover is calculated on global turnover for the target and its group, so could lead to potentially significant fines.
Comment
Although the UK has comprehensive consumer protection laws, enforcing these laws has been challenging for consumers and regulators. The government's policy papers suggest that consumers lose £54.2 billion annually due to unresolved disputes with traders, and current enforcement processes are slow and lack sufficient deterrence for businesses violating consumer protection laws. The DMCC Bill is a significant development in this area, as it allows the CMA to take direct enforcement action without going to court and impose large financial penalties for non-compliance.
Businesses operating in the sector should monitor the Bill's progress and review their current practices to ensure compliance with the proposed measures. By taking proactive steps to review and improve their practices, businesses can not only avoid the risk of enforcement but also gain the trust and loyalty of consumers by demonstrating their commitment to fair and transparent business practices.
For more information or if you wish to discuss what this update might mean for your business, please get in touch with Richard Hugo.
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