Consumer Protection Dispatch
In May 2024 the UK passed the new Digital Markets, Competition and Consumers Act (DMCC). Amongst other changes, the DMCC grants the UK Competition and Markets Authority (CMA) new powers to directly impose fines of up to 10% of a business’s global turnover for consumer protection breaches and to issue notices requiring changes to online interfaces, significantly enhancing the CMA’s enforcement capabilities.
While the DMCC introduced changes to digital markets and competition law in the UK, this update focuses on the consumer protection reforms. Draft guidance and consultations will take place before the DMCC becomes fully operational, expected in Q4 2024.
E-commerce businesses operating in the UK or targeting the UK market should review their current practices and, where necessary, update them to ensure compliance with existing and new consumer protection requirements, particularly considering the CMA’s new enforcement powers.
New Enforcement Powers
The DMCC empowers the CMA to directly enforce breaches of consumer protection law via administrative financial penalties. Before this development, penalties could only be imposed via formal action through the courts. The new streamlined process allows the CMA to directly impose a fine of up to 10% of the infringing businesses global turnover, significantly strengthening the powers of the CMA. The CMA also has powers to issue “online interface” notices—requiring businesses to modify their online interface, display warnings to consumers visiting an online interface, restrict access to noncompliant interfaces, or delete a domain name and take steps to facilitate the registration of that domain name by the CMA.
Changes to Consumer Protection Law
The DMCC introduces new consumer rights in respect of harmful business practices that are particularly prevalent in the digital marketplace, revoking and restating the UK’s previous Consumer Protection from Unfair Trading Regulations (introduced in 2008 in response to the EU Unfair Commercial Practices Directive). In particular, the DMCC seeks to combat:
- Fake Reviews
The DMCC prohibits submitting or commissioning fake reviews and reviews that conceal incentives given to consumers for positive feedback. A fake review is defined as “a consumer review that purports to be, but is not, based on a person’s genuine experience.”
Publishing consumer reviews in a misleading way is also prohibited. This includes failing to publish or removing negative reviews, giving greater prominence to positive reviews, or omitting information such as incentives given to consumers for writing reviews.
Businesses must also take “reasonable and proportionate steps” to prevent and remove the publication of fake or incentivized reviews and consumer review information that is false or misleading.
Businesses that publish consumer reviews will likely need to implement policies and procedures to ensure compliance with these requirements. The CMA is expected to publish guidance, in particular on the meaning of “reasonable and proportionate steps.”
- Drip Pricing
As explained in our earlier article, drip pricing involves advertising a price for a good or service that is less than the actual price a consumer will pay.
The DMCC effectively bans drip pricing by requiring businesses to disclose the total price of a product in any invitation to purchase (e.g., an advert or product listing). This must include fees, taxes, charges, or other payments and any variable mandatory fees (e.g., delivery charges) and how they will be calculated.
This follows recent developments in the U.S. targeting hidden and misleading fees as an unfair and deceptive practices.
- Subscription Contracts
The DMCC also targets so called “subscription traps”—where consumers are enticed in with a free trial or low introductory price before being charged a higher rate in future.
Under the DMCC, subscription contracts for the automatically recurring or continued supply of goods, services or digital content with an initial lower price are now subject to new requirements, including:
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- the provision of certain pre-contract information in a specified form;
- prominent reminder notices to be given, depending on the frequency of renewal payments. This includes reminder notices before a free-trial or low-cost offer terminates;
- a straightforward way for consumers to end the subscription without having to take steps that are not reasonably necessary—where subscriptions are entered into online, they must also be cancellable online;
- the right to cancel a subscription, without penalty, during: (a) an initial 14-day cooling off period; and (b) a further 14-day cooling off period once the initial free or discounted period has ended and/or where a renewal commits the consumer to a further subscription of 12 months or more.
Failure to comply with these obligations may allow the consumer to cancel the contract without penalty at any time.
How should businesses prepare?
Considering the CMA’s enhanced enforcement powers, it will be important to review practices to confirm compliance with existing UK consumer protection requirements and the changes introduced by the DMCC—for example, ensuring that adverts and product listings provide the actual cost of products and appropriate procedures are in place to prevent and remove fake reviews. This is particularly the case for e-commerce sellers or platforms that target the UK market. By proactively addressing these areas, businesses can better prepare for the DMCC’s full implementation and avoid substantial fines and reputational damage.
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