23 May 2022
Radar - May 2022 – 3 of 3 Insights
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.
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.
Measures to tackle subscription traps and auto-renewals will include:
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:
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.
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.
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.
Regarding competition policy, the government has decided on a number of reforms including:
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.
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.
23 May 2022