HomeInsightsCompetition and Markets Authority publishes new guidance on unfair contract terms for businesses.

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The CMA has published research conducted amongst UK businesses, which reveals that 54% of those surveyed do not fully understand the rules on unfair terms, which directly impacts how they treat their customers.

The research also revealed that some businesses think a signed contract is final, not realising that they cannot enforce a term against a consumer if it is unfair.  Others may copy terms from larger businesses or competitors, assuming incorrectly that these will be automatically fair and legally binding.

In response to the research findings, the CMA has launched a new campaign, consisting of simple videos and guides, to inform businesses about what makes a term “unfair” and help them understand how to treat their consumers fairly.

The CMA explains that unfair terms are “those that give businesses an unfair advantage over consumers”, often by reducing their rights or ability to complain if things go wrong.  For example, they can include:

  • keeping all of a customer’s deposit if they cancel, regardless of the amount the business is actually losing as a result;
  • using excessively long notice periods that end up tying customers into a contract for longer than they want; and
  • excluding the business’s liability for things that are its fault (i.e. delays, or faulty goods or services).

The research showed that less than half (45%) of those surveyed claimed to know the rules on unfair terms well, whereas 36% owned up to not having a strong grasp, and 18% admitted that they had never heard of them.

It also found that 67% of UK businesses sell to consumers, with most of these using some form of terms and conditions.  The rules on using unfair terms are set down in the Consumer Rights Act 2015.  However, only 15% said that they were familiar with the Act when asked.

Paul Latham, Director of Communications at the CMA, said: “Consumers have a right to be treated fairly – and businesses need to know that they can’t rely on their terms and conditions if they’re not fair.  We know that the majority of businesses want to do the right thing by their customers, but it’s worrying that many businesses are not familiar with the law.  That’s why we have launched this campaign to help businesses protect themselves against breaking the law, and against using contracts that they can’t enforce”.  To read the CMA’s press release in full and for links to the research, videos and guides, click here.

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