The Digital Markets, Competition and Consumers Act 2024 (the Act), in addition to introducing the digital markets regime1 and enhancing the competition regime,2 has introduced amendments to the current consumer protection regime, set to come into force in spring 2025. The consumer protection regime is expected to impact all businesses which sell to UK consumers as the Act will confer on the Competition and Markets Authority (CMA) stronger enforcement powers equivalent to those of the competition regime.
Updates to the UK consumer protection regime
1. Prohibited practices
Practices are automatically prohibited if they fall in any of the following categories: omission of material information from an invitation to purchase; violation of one of the 32 banned practices specified by the Act; and promotion of unfair commercial practices in a code of conduct.
- Invitation to purchase: When businesses make any invitation to purchase, they must ensure that they include information required by the Act.
- Violation of any of the 32 banned practices: These are specific prohibited practices per se, and there is no requirement for there to be any effect on consumers (these are contained in Schedule 20 of the Act). Examples of these include: displaying quality marks without the necessary authorisation; falsely stating that a product or offer is only available for a limited time in order to pressure consumers into an immediate decision; claiming to offer a prize promotion without awarding the prizes; or creating the impression that the consumer cannot leave the premises until a contract is formed.
- Promotion of unfair commercial practices in a code of conduct: This mainly addresses promotion by any person responsible for the content of, or for monitoring compliance with, a code of conduct governing the behaviours of the business. Examples include: giving advice in relation to compliance with the code that a practice is legitimate, when it is in fact one of the 32 banned practices; or including a provision in the code that involves a misleading omission.
2. Assessing unfairness of other practices
Any practices that fall outside the strictly prohibited practices must be assessed for unfairness. Where the practice in question is likely to result in the average consumer taking a different transactional decision, it will be considered unfair.
When conducting risk assessments of their practices, businesses should be mindful that the threshold of an “average consumer” refers to one that is reasonably well-informed, observant, and risk averse. Notably, where the businesses foresee certain consumers being particularly vulnerable to a practice (e.g., children might be vulnerable to advertisements relating to toys within the platforms they use), the “average consumer” would be someone from this group of vulnerable consumers (and therefore, a lower threshold) instead of a reasonably well-informed, observant, and risk averse consumer. Businesses should take this into consideration in their risk assessments.
Practices that should be assessed for unfairness include the following:
- Misleading actions: Providing false or misleading information when selling products, deceiving product packaging, marketing techniques that may confuse the product with others by using similar colours or trademarks, setting the business out as compliant with a code of conduct requirement when they are not.
- Misleading omissions: Omitting key information about the product and information legally required to be disclosed, failing to identify the true commercial intent of the business (unless it is apparent). Information given can also be deemed a “misleading omission” if it is unclear or untimely or displayed in a manner where consumers are unlikely to see it. Businesses should ensure that all key information is displayed prominently, taking into consideration font sizes, font colours and so on.
- Aggressive practices: Using harassment, coercion, or undue influence (for example, pressuring consumers to sign contracts by offering them same-day only discounts or building a contract termination process that is unreasonably complicated to deter consumers).
- Contravention of the requirements of professional diligence: Acting without having regard to or protecting the consumer’s legitimate interests or expectations of the business (for example, businesses should not take advantage of the consumer’s lack of knowledge of the product).
For all of the above, it is sufficient for the practice to have taken place; there is no requirement that consumers were, in fact, misled or deceived due to the practice. Therefore, businesses should keep in mind that merely carrying out a practice may result in liability under the regime and should review all practices continually to ensure that every possible effort is being made to carry out consumer-friendly practices.
3. CMA's direct powers
The CMA will now be able to directly decide if a commercial practice is unfair and take enforcement action without needing to obtain a court order to do so. Enforcement powers include issuing “provisional infringement notices” requiring a business to stop any infringements, issuing penalties for non-compliance, prosecuting traders criminally for engaging in most unfair consumer practices, and so on.
4. Criminal offences under the Act
Under the Act, the unfair commercial practices detailed above are all strict liability offences (with the exception of “contraventions of the requirements of professional diligence”). The strict liability offences merely require an unfair act or omission to be carried out to prove liability, though businesses are free to prove a defence. Businesses should be aware that the strict liability nature of these offences results in a very low threshold for businesses to be liable.
For the exception of “contraventions of the requirements of professional diligence”, alongside the above, it must also be shown that the business either had knowledge of or was reckless in engaging in a commercial practice that is not professionally diligent. This consideration of knowledge or recklessness is not a criterion for the strict liability offences.
Businesses should be aware that if they are found to have committed an offence with the permission of an officer of the business, both the business and the officer will be liable and punished.
The CMA has the power to bring criminal prosecutions in relation to these offences, with the penalties ranging from a fine to imprisonment not exceeding two years, or both.
5. Civil offences under the Act
With its direct enforcement powers, the CMA may investigate, determine, and take enforcement action in response to, among others, use of unfair terms in consumer contracts, breaches of certain consumer protection provisions in the Act, breaches of undertakings given to the CMA, and breaches of direct enforcement directions by the CMA. Enforcement action in relation to the above breaches includes enforcement directions such as injunctions, substantial monetary penalties based on worldwide turnover, and enhanced consumer measures like requiring the business to offer compensation to consumers, to implement compliance measures (e.g., appointing a compliance officer), or to advertise its infringement and the remedies it undertook.
Businesses can appeal against these notices in the UK courts and challenge the nature of the notice or the sum of a monetary penalty. They can also contact the CMA to request that any enforcement directions be varied or revoked, which the CMA can do if the enforcement direction is no longer necessary (for example, if the party no longer operates a consumer-facing business with a UK connection).
The CMA can also apply to the UK courts for an enforcement order instead of taking direct enforcement action itself, if it considers that there has been a relevant infringement.
Under the Act, both the CMA and the court, in response to an application, have the power to impose fines up to £300,000 or 10% of worldwide turnover, whichever is higher.
6. Subscription contracts
A new stand-alone regime has been introduced to address subscription contracts.3 Under the regime, among others, businesses will have to give consumers pre-contract information about the subscription and confirm it post-contract in a durable medium, send renewal reminders to customers regularly, make termination mechanisms easy for the consumer, and so on. These requirements, though necessary for the protection of consumers, may be an added operational burden on businesses.
7. Prohibition of fake reviews
Notably, one of the 32 practices automatically banned by the Act revolves around reviews and information. This includes submitting or commissioning fake consumer reviews or concealed incentivised reviews, publishing misleading or unverified consumer reviews without taking reasonable and proportionate steps to verify them, offering services to procure banned reviews and information for traders, and offering services to traders to facilitate procurement of fake reviews. This will be particularly relevant to large social media companies (that are also likely to be caught under the digital markets regime) as these platforms are used as a marketing avenue for various businesses.
The platforms should be aware that the Act also imposes a positive obligation on those who publish or provide access to consumer reviews to take reasonable steps to prevent publication of and remove any reviews that may be banned. Failure to do so amounts to an unfair commercial practice in itself. Therefore, platforms should ensure that they not only warn consumers with, for example, a published policy prohibiting fake reviews but also continually employ adequate monitoring systems to prevent and proactively remove such publications to avoid liability.
Final thoughts
The Act has strengthened the consumer protection regime and expanded it to specifically target the prevalence of e-commerce and its impact on consumers as well. While the guidance published by the CMA in relation to this regime is still in the draft stage, it highlights key elements that businesses should consider.
The CMA can directly investigate prohibited practices, unfair commercial practices, or related offences and take enforcement action against businesses through substantial fines or measures such as seeking compensation and requiring compliance systems to be put in place. Where businesses engage in the unfair commercial practices detailed above, they can also be liable for a criminal offence and face imprisonment. The Act also tackles fake reviews, prohibiting them outright and requiring digital platforms to be accountable for preventing fake reviews. Businesses should therefore adopt measures such as a published policy prohibiting fake reviews, setting out the approach to be taken with incentivised reviews and consumer review information, and mechanisms for investigating suspected fake reviews. Businesses must also monitor and enhance their operations to ensure compliance with the regulations on subscription contracts. With the forthcoming amendments, the stakes are high for businesses. Therefore, businesses should familiarise themselves with the new regime; conduct regular, thorough assessments of their practices; and develop and apply proactive compliance measures in anticipation of the commencement of the regime in spring 2025.
- See our alert on the digital markets regime for a detailed discussion on the new requirements.
- See our alert on the UK competition and merger control regime for an in-depth review of the key changes.
- For a more in-depth review of the subscription contracts and fake reviews aspect of the Act, see our alert of 25 June 2024 on the Act.
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