Digital Markets, Competition and Consumer BillAre you ready?

The UK government has confirmed it will bring forward the Digital Markets, Competition and Consumer Bill. Consequently, some of the most significant reforms of consumer law for years are anticipated, perhaps as soon as Autumn 2023. The bill is expected to provide new powers to the Digital Markets Unit within the Competition and Markets Authority (CMA) to foster more competitive digital markets, which will impact most businesses in the UK.

Much of the bill’s intended effect is expected on the biggest digital firms, but a significant consumer law reform is also likely. Consumer law can be onerous on businesses. If they are not aware of their responsibilities, they can fall foul of the rules with harsh consequences. The bill will likely give the CMA greater enforcement powers, including new capabilities to fine firms up to 10% of their global turnover for mistreating customers. Businesses should therefore look out for any revised CMA guidance relating to consumer protection, merger control, and competition law and adapt their processes accordingly. Businesses may wish to have their consumer terms and conditions reviewed and their contracting processes audited to ensure compliance with evolving consumer law.

One key area of focus with the changes to consumer law is expected to be a move against “subscription traps”. The CMA has scrutinised ‘subscription models’, particularly where contract terms do not warn of automatic renewal. Concerns have been raised as to whether such contracts are fair, as consumers may find themselves locked into paying a subscription for a service they are not actually using, being subject to unexpected price increases and not being able to get out of the contract easily. In addition, there may be renewal fees, cancellation fees, and other costs, which were not anticipated or communicated at the outset. Businesses should clearly inform their consumer customers about any autorenewal terms and send reminders before the renewal occurs. The CMA has previously set out its expectations, with companies ensuring that cancellation is no more complex than steps taken to purchase.

The CMA has already taken enforcement action against anti-virus providers Norton and McAfee concerning their auto-renewing anti-virus software subscriptions. In October 2021, the CMA produced guidance setting out nine’ Compliance Principles’ and providing examples of terms ‘more likely to comply’ and ‘unlikely to comply’ with consumer law. It has therefore been anticipated for some time that such rules will soon extend to all businesses using a subscription model with auto-renewal terms and it seems likely that the bill will bring about this change.

Another key focus from a consumer law perspective will be on fake reviews, with the Autumn 2022 statement saying that the bill will seek to protect consumers in fast-moving markets by tackling fake reviews online. Online reviews influence a consumer’s decision to purchase and therefore the bill is expected to prohibit the submission, commission or facilitation of fake reviews and will require businesses who host consumer reviews to take reasonable steps to ensure they are genuine and originate from bona fide consumers.

A third focus of the bill in respect of consumer law will be to strengthen protections where consumers use “saving schemes”, for example, Christmas saving clubs. Currently, the schemes do not protect consumers if the business goes bust. The bill will seek to avoid repeats of scandals like Farepak in 2006, where the Christmas saving club went bust, and many people struggled to recover their money. The new law is expected to require such prepayment schemes to safeguard customers’ money through insurance or trust accounts fully.

In light of the new bill and anticipated changes, businesses should check their documentation and contracting processes. Consumers must be provided with clear information about their rights, meeting all requirements under current consumer law, particularly in respect of subscription payments, auto-renewal terms and the ability to cancel contracts. Businesses should look at their review processes and how they will comply with new rules, particularly the need to take reasonable steps to verify that reviews are genuine.

If you would like assistance with commercial and consumer matters, please get in touch with our Corporate & Commercial team by emailing online.enquiries@la-law.com or calling 01202 786188.

Ruth Chornolutskyy, Associate