UK government plans to update consumer rights

What's the issue?

The consumer world has changed, particularly in relation to the purchasing of products from online platforms and the consumption of digital content. This has been heightened by changing consumer behaviours and an even greater shift towards online transactions as a result of the COVID-19 pandemic.

The UK has a robust consumer rights regulatory framework strengthened by the Consumer Rights Act implemented in 2015, some 6 years ago now. The Department of Business, Energy & Industrial Strategy is looking again at the consumer rights regime and whether it is fit for purpose in today's world.

What's the development?

In July, BEIS published a consultation on "Reforming competition and consumer policy". Some of these long-awaited proposals were first set out in a 2018 Green Paper and other recommendations were made in the Penrose report.

The headline changes being consulted on are:

a ramped-up enforcement regime led by the CMA and other regulators. This will include giving the CMA the power to fine traders up to 10% of global turnover for non-compliance and to fine traders for failure to cooperate with CMA investigations
collective redress reforms to make it easier for consumers to bring class actions
reform of the CMA's enforcement powers under Part 8 of the Enterprise Act 2002 to allow it to take action without going to court and to change the way undertakings to the CMA are enforced
protection for consumers from subscription traps, including by requiring that auto-renewal should always be an opt-in choice, and by introducing new practices to the list of practices which are always unfair under the CPUT Regulations. There would also be enhanced pre-contractual information provisions
measures to prevent negative behavioural nudges (sludges) by changing CPUT to address drip pricing and undisclosed paid-for advertising, and to protect consumers from losing advance payments in the event of subsequent trader insolvency. Secondary legislation around this could be introduced under the Consumer Rights Act
measures to crack down on fake reviews by amending the CPUT Regs adding either asking someone to do a fake review for payment or encouraging fake reviews by any form of inducement, to the list of unfair commercial practices. Hosting or offering fake reviews could also be added. This would be similar to changes to EU consumer law
broadening the scope of the ADR regime, including by halving the period regulated businesses have to resolve complaints before a consumer can request ADR.

What does this mean for you?

The planned changes will impact any business selling to UK consumers. Many were suggested as far back as 2018 and progress to date has been slow but it should now pick up, particularly with the increased focus on online harms in general.

Businesses and particularly online businesses should monitor developments closely.

The use of subscription models by the major retailers for both digital and physical products has increased significantly since 2015. As stated in the consultation, consumers now use such models not only for items like gym memberships, but for media and entertainment, and food shopping. Mobile commerce, which gives consumers access to takeaways and taxis in seconds is now a fundamental and unchallenged part of many consumers' lives.

One of the biggest problems with these subscription services, according to BEIS is the practice of so-called auto-renewal models or subscription 'traps'. These are subscription models which automatically renew unless they are cancelled by consumers, which can result in the consumer being charged a significantly higher fee once their initial subscription period has come to an end.

The suggestion is that many auto-renewal subscriptions exploit consumers by being poorly advertised at the time of enrollment. If they forget to cancel, consumers may be penalised by being charged a higher rate which is activated automatically, in many cases without the consumer even being notified. BEIS even refers to reported incidents when consumers have remembered to cancel their subscriptions but have been unable to do so, or have managed to do so only after jumping through a disproportionate number of administrative hoops.

The proposal is for the law to be amended to ensure that consumers always have the option of a subscription which does not auto-renew, meaning that consumers would only have to sign up for auto-renewal if they wished to. The government wants the law to be clarified to ensure that any time an auto-renewal subscription is used, the consumer is prominently given important information like the term length and the notice period for cancellation. There is also a suggestion that consumers should have a right to be issued with reminders at the opportune time when they would need to cancel their subscription in order to avoid paying a higher fee.

Fake online reviews

The consultation also recognises the need to protect consumers from a practice which is unique to the world of online transactions, the scourge of fake reviews, often uploaded by retailers themselves, being used to influence consumer behaviour and drive purchasing, with the consumer having no effective means of identifying whether or not they are being misled.

Fake reviews can work in two ways, either providing a glowing but fabricated account of a product a retailer wishes to sell or providing a disparaging and baseless review of a competitor's product. There is existing legislation in place in the form of the Consumer Protection from Unfair Trading Regulations 2008, which is designed to deal with this practice. It lists publication of fake and misleading reviews as an unfair commercial practice, likely to cause the average consumer to take a different decision.

However, it is widely acknowledged that the law as it currently stands, does not do enough to deal with this all too common problem. The major challenge is with enforcement, particularly because it is hard to distinguish between the genuine and the nefarious, especially in a world where web users can use VPNs and other tools to easily conceal their IP addresses.

Crucially, BEIS is not proposing that the whole practice of consumers posting online reviews be prohibited. The proposal is that the commissioning or incentivising of fake online reviews be added to the CPUT Regulations as examples of unfair commercial practices. Commissioning means requesting that consumers write reviews in exchange for payment, whereas incentivising is wider and includes non-monetary rewards for the writing of fake reviews.

It seems self-evident that these practices should amount to unfair commercial practices. Crucially, engaging in these practices would be deemed to be automatically unfair under the Regulations.

Another proposed addition is for the hosting of consumer reviews without taking reasonable and proportionate steps to ensure they originate from consumers who have actually purchased that good or service.

It is unclear precisely how onerous the obligations imposed on online platforms would be in terms of requiring them to determine whether or not a review was legitimate. It is possible that many online retailers would judge it an impossible task to police the internet in this way and remove their review functions altogether.

While the need to protect consumer rights is clear, enforcing these rights and implementing the right solutions in a changing world is likely to be a constantly evolving challenge.