Watershed day in UK consumer protection law

The Digital Markets, Competition and Consumers Act (DMCC), elements of which came into force yesterday, April 6, will have broad implications for various stakeholders, both within the UK and potentially beyond. It is the first day from which the UK’s Competition and Markets Authority (CMA) can fine businesses in the UK of up to 10% of global turnover for breaches of UK consumer protection law. In addition, the activities of Fake Reviews and Drip Pricing are expressly banned. Lawyers from our #consumer law and #competition teams comment on these changes and the various other potential impacts this new legislation will bring.

Compliance: A top priority for UK businesses:

Matthew Gough, a Partner and Head of Consumer Law, said:

“The importance of getting consumer law “right” is now an essential component of doing business with consumers in the UK. The consequences of getting it wrong can go to the very heart of the value of a consumer business and we are already seeing this becoming a more regular board level issue as a result.”

Eve England, Partner, Technology & Consumer, said:

“Although the compliance requirements themselves are not drastically changing, this new regime will mean that the options available for dealing with non-compliance will have more teeth, making consumer law compliance more important than ever.”

Jessica Martin, Partner, added:

“The CMA’s consumer law powers have historically lagged far behind its competition law powers. As of 6 April the CMA’s consumer law powers are now substantially extended. These changes represent a watershed moment for enforcement in the UK, with the CMA’s consumer law enforcement powers now on a much more similar footing to its competition law powers. The CMA has published a new guidance document (CMA58) explaining these new powers in more detail and we encourage businesses to digest.”

Julia Woodward-Carlton, Partner, Competition, said:

"The CMA has been wanting powers to directly enforce consumer law for a long time. We know how time-consuming, intrusive and disruptive competition law investigations can be for businesses. We have also seen how the consequences for getting it wrong can be severe with the CMA not only handing out significant fines but also pursuing director disqualifications. The key question for the CMA, now that it has finally got these powers, is how far will it go in using them in practice.”

A down on unfair commercial practices, including fake reviews and drip pricing:

Eve England, Partner, Technology & Consumer, said:

“With more and more of us contracting for products and services online, the new DMCC is clamping down on the use of unfair commercial practices when engaging with consumers. From the 6th April, the use of fake reviews and drip pricing will be banned. These practices have faced wide criticism over recent years, and these new measures seek to level the playing field in digital sales and promise to give consumers greater confidence in their buying choices. Armed with a new set of robust enforcement powers, the CMA has promised to crack down on bad practices and businesses are encouraged to review their systems and processes to ensure that they do not fall-foul of these new prohibitions. The CMA has emphasised that businesses cannot avoid implementing appropriate and removal steps for banned reviews just because they don’t have sufficient resources available to them. This is likely to be a significant investment for some businesses.”

Matthew Gough, Partner and Head of Consumer Law, added:

“The addition of drip pricing and fake reviews to the list of banned practices in the DMCC is likely to be just the beginning. The UK Government has new powers under the DMCC to add to the list of these banned practices over time. This means that the DMCC has been future-proofed to reflect changes in the way that products are presented to consumers online and via other sales channels.”

Elizabeth Coleman, Partner, Competition, added:

“The unfair commercial practice regime is not new, but the way that these can be enforced is changing: The CMA will now be able to take direct action against businesses who are not adhering to these principles, and businesses must note that criminal sanctions can also be incurred in more serious cases.”

UK consumer law enforcement powers have finally caught up Europe:

Eve England, Partner, Technology & Consumer, said

“The CMA's newly granted authority to impose fines of up to 10% of global turnover, coupled with enhanced investigatory powers such as dawn raids, sees the UK finally catching up with the European Union in terms of consumer protection law enforcement. EU countries have had stringent consumer law enforcement powers for some time following EU Directives in this area. UK corporates should take note of these new powers, and focus on ensuring their businesses are complying with the UK consumer law regime. It is also worth reminding businesses that consumer law is holistic in its application, meaning all of a business’s systems and communications with consumers need to be taken into account, not just the legal terms and conditions that customers are asked to agree to.”

Heightened risks around greenwashing:

Matthew Gough, a Partner and Head of Consumer Law, said:

“The CMA has re-iterated that it remains focussed on holding businesses to account when it comes to making sustainability claims, and this will apply to all sectors, including retail fashion and consumer goods. Although the UK does not have specific greenwashing laws, the DMCC gives the CMA new direct enforcement powers against anyone who fails to comply with the DMCC’s prohibitions on unfair commercial practices and wider consumer law requirements without having to go to the courts. The new changes will also give the UK Government greater scope to extend the list of prohibited practices, which could, in the future, include a specific reference to greenwashing. It will be essential for any businesses making sustainability claims to consumers to review and, if needed, update any statements being made to avoid reputational scrutiny and potential enforcement action.

”It’s also worth noting that the unfair commercial practices regime applies to any business making claims to consumers, which means it can affect manufacturers and suppliers of consumer goods and services as well as those selling directly to consumers.”  

Elizabeth Coleman, Partner, added:

“The way that countries worldwide are addressing the rise in greenwashing claims is becoming more and more regulated. We are also seeing an increase in the divergence in the way that this is being applied. The challenge for global businesses is that there will be various legal regimes to contend with, and the UK’s enhancement to its consumer law enforcement powers only adds to this complexity.”