What's the issue?
In July 2021, BEIS published a consultation on reforming competition and consumer policy. The consultation built on a 2018 Green Paper and recommendations made in the Penrose report. Alongside reform of the CMA's powers and processes, the focus was on subscription traps and fake online reviews. Other proposals looked at a collective redress scheme to make it easier for consumers to bring class actions, and at measures to prevent negative behavioural nudges and dark patterns.
What's the development?
The government has published its response to the consultation on reforming competition and consumer law. It proposes making a number of legislative changes although no timetable has been set out.
Subscription traps
Measures to tackle subscription traps and auto-renewals will include:
- requiring businesses to provide clear information to consumers before they enter into a subscription contract
- a specific requirement on traders to remind consumers before a contract rolls over or auto-renews and before a free trial or initial offer ends
- a specific requirement on traders to provide consumers with a straightforward, cost effective, timely exit mechanism from subscription contracts.
There will be exemptions where sector specific rules are of an equivalent or higher standard. The government does not, however, propose making auto-renewals an opt-in choice, nor requiring explicit consent to continuing a subscription at the end of an introductory offer.
Fake online reviews
The government plans to amend the list of automatically unfair commercial practices under the CPUT Regulations to further deter unfair commercial practices. It will also consult on specific additions of blacklisted terms to tackle fake reviews including:
- commissioning or incentivising someone to write and/or submit a fake consumer review of goods or services
- hosting consumer reviews without taking reasonable and proportionate steps to check they are genuine
- offering or advertising to submit, commission or facilitate fake reviews.
The EU's Omnibus Directive includes similar blacklisted terms.
Undisclosed paid-for advertising
The government has brought undisclosed paid-for advertising within the scope of the Online Safety Bill and may also tackle it as part of its Online Advertising Programme. The CPUT Regulations already make some provision as failure to disclose commercial intent is a misleading practice. The government will continue to gather evidence on the impact of undisclosed paid-for advertising appearing in regular online search results.
Dark patterns, sludges and drip-pricing
The government is not proposing to legislate to tackle these areas although there may be future amendments to blacklisted terms under the CPUT Regulatoins at some point. This contrasts with current EU proposals under the draft Digital Services Act.
Strengthened pre-payment protections
Christmas savings clubs and similar schemes are not FCA-regulated so consumers do not have protection if they collapse. The government plans to strengthen protection for consumers and will carry out research to identify next steps.
Enforcement
The CMA will get powers to enforce some consumer protection legislation directly, including to award compensation to consumers and impose penalties for breaches of consumer protection law without having to go to the courts.
Maximum fines for breaches of consumer protection law will be raised to 10% of annual global turnover.
Consumer redress
The government plans to strengthen the consumer ADR process by requiring ADR providers to be accredited and setting out common standards to improve the quality of service. The government will not be moving ahead with plans to introduce a collective redress regime for consumer protection cases.
Competition policy
Regarding competition policy, the government has decided on a number of reforms including:
- the CMA will be required to produce regular reports on the state of competition
- the CMA will be subject to a statutory duty of expedition in relation to its competition and consumer law functions including relating to a new digital competition regime
- procedures for market inquiries will be improved by allowing more opportunity for binding commitments to be accepted, and greater flexibility for the CMA to define the scope of market investigations
- the jurisdictional thresholds for mergers will be revised. The turnover threshold will be increased to £100m and there will be a safe harbour for mergers between small business (with UK turnover below £10m). The CMA will be able to investigate mergers where at least one party has a UK share of supply of 33% and has UK turnover of more than £350m
- some merger procedures will be revised to allow commitments to be given earlier, and there will be an automatic fast-track referral procedure
- enforcement will be strengthened. The CMA will get new evidence gathering powers among other things. There will be tougher financial penalties for failure to comply with an investigation and new civil penalties for non-compliance with CMA orders, undertakings or commitments
- the CMA will have new powers to test and verify whether the use of algorithms by companies complies with competition law
- the Competition Appeal Tribunal will be given the ability to grant declaratory relief and discretion to award exemplary damages for breaches of competition law.
Other reforms specific to digital services and the market power of the large online players will be dealt with by a new legislative regime as we discuss here.
What does this mean for you?
The proposed changes to consumer protection law do not go as far as expected and, in many cases, the government proposes further consultation.
While the financial penalties regime exceeds that introduced in the EU under the Omnibus Directive, the reforms stopped short of acting on dark patterns, sludges and drip-pricing (which the EC is proposing to tackle under the Digital Services Act). Crucially, the proposals to set up a collective redress scheme for consumers have also been dropped.
Overall, the area which is likely to see the most change is subscriptions and auto-renewals but even there, the final proposals are weaker than they might have been. In the May Queen's Speech, the government announced a draft Digital Markets Bill which will place the Digital Markets Unit on a statutory footing, and cover auto-renewals and fake online reviews.
The CMA will welcome proposals to give it enhanced powers and the ability to act directly rather than having to apply through the courts in a number of areas.
