DMCC Bill, Part 3 - a new enforcement regime for UK consumer protection law

The Consumer and Markets Authority (CMA) is currently the primary enforcer of consumer protection law, sitting alongside sector regulators like Ofcom, and the FCA, and the Trading Standards Service. The enforcement framework has been criticised for requiring enforcers to go to court to exercise the majority of their powers, and for failing to provide genuinely dissuasive sanctions.

The draft Digital Markets, Competition and Consumers (DMCC) Bill was introduced to Parliament on 25 April 2023.It is intended to help regulate digital markets and to overhaul consumer protection law. Part 3 of what is an extremely lengthy piece of legislation, introduces a new regime for consumer protection law enforcement aimed at resolving current weaknesses, including by giving the CMA significant new powers to enable it to enforce directly, rather than having to go through the courts, and introducing a significant penalties regime. 

The DMCC sets out a court-based and CMA direct enforcement regime. It will replace Part 8 of the Enterprise Act 2002 once the new enforcement regime begins, applying only to infringements after that point.

What are "relevant infringements" for the purposes of the DMCC Bill?

The enforcement regime will apply where a commercial practice (promoting or supplying goods, services or digital content to a consumer, or promoting or supplying a consumer's goods, services or digital content to a trader) harms the collective interests of consumers by a single or repeated act or omission.

The commercial practice must also meet:

• the UK connection condition set out in s141 – ie the trader has a place of business in the UK, is carrying on business in the UK, or the commercial practice takes place as part of activities directed at consumers in the UK; and
• the specified prohibition condition set out in s142 – ie the commercial practice must breach one of the laws set out in Schedule 13 (court-enforced) or 14 (CMA direct enforcement). This includes the Consumer Rights Act, the Sale of Goods Act, the Consumer Contracts Regulations, the eCommerce Regulations and the Supply of Goods and Services Act.

Who can enforce?

A list of enforcers is set out in s143 and includes the CMA, the FCA, the ICO and Ofcom. The Secretary of State can add to or subtract from the list. The CMA has powers to intervene where applications are or should be made by other enforcers who are required to notify the CMA of their enforcement actions, including applications and acceptance of undertakings.

Court-based enforcement (Chapter 3)

Enforcement orders, undertakings and online interface orders

Enforcers will be able to apply for enforcement orders against an individual the enforcer considers has engaged in, is engaging in or is likely to engage in a relevant infringement, and against an accessory (any person who has a special relationship with the infringer and who consented or connived in the infringement). The court can make orders binding on other group members where it considers it just, reasonable and proportionate. 

Enforcers must consult (in a specified manner) with the alleged perpetrator before making a court application for an enforcement order unless the CMA gives dispensation not to for reasons of urgency or where it is not reasonably practicable for the enforcer to identify the alleged perpetrator or their contact details. The obligation to consult ends if the respondent fails to respond within specified time periods (at least 14 days).

Enforcement orders set out the nature of the infringement and require the respondent to cease the relevant infringement. The order can also give directions to the respondent to publish the order or make a corrective statement, or an order can impose a financial penalty. 

It is also open to the court to accept undertakings from the respondent or to make an interim enforcement order without prior notice. The Explanatory Notes (ENs) suggest this may be needed to prevent a misleading advert being published, for example.

The court can attach enhanced consumer measures to enforcement orders and undertakings where it is just, reasonable and proportionate. Enhanced consumer measures can take the form of redress measures (eg compensation), compliance measures, and choice or information measures to help consumers make informed purchasing decisions.

The CMA (not other enforcers) can apply to court for an online interface order (which essentially requires the respondent to change their online interface to bring it into compliance, prevent access to a non-compliant interface or provide a warning on it). According to the ENs, the DMCC extends the existing ability to do this from EU-derived consumer protection law only, to domestic law too. Interim online interface orders can be made without notice under specified circumstances for reasons of urgency.

Penalties

Financial penalties can be imposed by an enforcement order in relation to relevant infringements which have taken place (or are currently taking place) up to a maximum of:

• £300,000 or 10% of the respondent's turnover if higher, 

and for non-compliance with undertakings, up to a maximum:

• fixed penalty of £150,000 or 5% of the respondent's turnover if higher, and/or 
• daily rate penalty of £15,000 or 5% of respondent's daily turnover if higher.
  
   

CMA direct enforcement (Chapter 4)

The CMA is given powers to:

• Investigate suspected infringements
• Issue provisional infringement notices once it has started an investigation, setting out its provisional views and giving the enforcement subject an opportunity to respond. Where the CMA is considering imposing a monetary notice, this must be stated in the provisional infringement notice.
• Issue final infringement notices where proportionate to do so (for example, it would not be proportionate where the enforcement subject has already given an undertaking to correct infringing practices, unless they have then failed to comply with that undertaking or there has been a material change in circumstances). A final infringement notice can include compliance directions including to take enhanced consumer measures, and may impose a penalty in respect of an infringing practice which has taken or is taking place.
• Issue online interface notices as a last resort where the CMA is satisfied there are no other available means of preventing serious harm to the collective interests of consumers and where there has been or is likely to be an infringing practice. These cannot be issued where undertakings have been accepted unless they have not been complied with or there has been a material change in circumstances.
• Accept undertakings of actions to ensure compliance.
• Issue provisional and final breach of undertakings enforcement notices and provisional and final breach of directions enforcement notices.
• Issue provisional and final information notices to anyone providing the CMA with materially false or misleading information.

The CMA also has a backstop power to apply to a court for an enforcement order at the final stage of compliance failure in relation to an enforcement direction or a direction given in a final breach of directions enforcement notice. 

Penalties

Maximum fines attached to final infringement notices are the higher of:

• £300,000 or 10% of turnover.

If the CMA reasonably believes the respondent has failed to comply with notices or undertakings, it can issue provisional, and ultimately final breach of undertakings notices which may include a requirement to pay a:

• Fine of the higher or £150,000 or 5% of turnover, and/or
• Daily rate penalty of up to the higher of £15,000 or 5% of turnover. 

Similar provisions apply to breach of directions enforcement notices and false information notices which attract slightly lower financial penalties of:

• Up to £30,000 or 1% of turnover, whichever is higher.

The CMA will also be able to award compensation to consumers (outside the scope of this article).

Amendments to Consumer Rights Act investigatory powers (Chapter 6)

Schedule 15 of the DMCC amends Schedule 5 of the CRA, to:

• Allow the courts and CMA to impose financial penalties for failure to comply with a CRA information notice without reasonable excuse.
• Set out when and how an enforcement body can request information from people outside the UK.
• Clarify that an enforcement body can obtain an entry warrant to obtain documents accessible from or located at particular premises.

Enforcers with teeth?

Many of the measures set out in Chapter 3 of Part 3 of the Bill are familiar from or the same as those included in the Enterprise Act. What is different is the enhanced powers given to the CMA to enforce directly rather than having to go through the courts which is likely to significantly speed up consumer law enforcement. 

The other new element is the introduction of significant powers for the courts and the CMA to impose financial penalties for breaches of consumer protection law. Inevitably, there are likely to be some high profile recipients of these penalties, so it will be even more important to ensure compliance with the full range of consumer protection laws, including elements introduced under the DMCC Bill relating to subscription contracts and auto-renewals (read more here), and planned upcoming secondary legislation to tackle online fake reviews.