Insights Government releases its response to consultation on reforming consumer and competition policy

On 20 April, the UK Government released its response to the 2021 consultation on reforming UK competition and consumer policy. This update deals only with the proposals relating to the reform of consumer policy.

A number of key consumer law reforms have been confirmed, which include:

Significantly enhanced enforcement powers

In a major change, the Government will move forward with an “administrative model” of enforcement, meaning that the CMA will be newly empowered to:

  • decide for itself (i.e., without needing to apply to the courts) where consumer protection law has been breached;
  • direct compliance and impose turnover-based or fixed monetary penalties (see below);
  • impose fines of up to 10% of global turnover for breaches of consumer law (considerably greater than the fining powers introduced under the EU’s new ‘Omnibus Directive’ (see our summary here); and
  • sanction businesses who fail to comply with undertakings given to the CMA (which will become legally binding), or other investigative measures, with fixed penalties of up to 1% of the business’ annual worldwide turnover, and an additional daily penalty of up to 5% of daily worldwide turnover while the non-compliance continues.

Subscription traps

The use of automatically renewing subscription models has been a hot topic for some time now (see our updates here and here). Under the new rules, businesses will need to:

  • provide clearer information to consumers before they enter into a subscription contract;
  • send reminders to consumers before a contract rolls over (or auto-renews), which specifies that their subscription contract will auto-renew unless cancelled;
  • issue reminders to consumers that a free trial or low-cost introductory offer is coming to an end; and
  • ensure that consumers have a straightforward, cost-effective, and timely mechanism to exit a subscription contract.

Certain regulated sectors with equivalent or higher rules to those being proposed will be excluded.

Although the new rules bring about significant changes for businesses using auto-renewing subscription models, it’s interesting to note that the Government will not be taking forward certain proposals which were contemplated in the consultation. These include proposals to require business to:

  • offer consumers a choice (at the pre-contract stage) to take the subscription without auto-renewal or rollover terms;
  • obtain the consumer’s explicit consent to continuing the subscription after the free trial or low cost introductory offer period ends; and
  • suspend service and stop charging money under a subscription contract, where there is evidence of consumer inactivity.

Fake reviews

In tackling the consumer harm caused by fake reviews – i.e., those that do not reflect an actual consumer’s genuine experience of a good or bad service – the Government will:

  • consult on adding the following to the current list of automatically unfair (aka “blacklisted”) practices in the Consumer Protection from Unfair Trading Regulations 2008:
    • commissioning or incentivising any person to write and/or submit a fake consumer review of goods or services;
    • hosting consumer reviews without taking “reasonable and proportionate” steps to check they are genuine; and
    • offering or advertising to submit, commission or facilitate fake reviews;
  • continue to build its evidence base on the impact of undisclosed paid-for advertising appearing in regular results of online search rankings and strengthening the law to make it easier for enforcement agencies to take action against certain exploitative online practices such as ‘drip pricing’.

Package travel rules

The Government will update and simplify the Package Travel and Linked Travel Arrangement Regulations 2018, allowing easier enforcement and compliance with the law by businesses, better flexibility for insolvency protection for non-flight packages, and enabling BEIS to improve the quality of information and guidance available.

Many of the incoming reforms will require legislation to implement, so should be considered as fairly early stage. They also lack the finer detail that legislation will bring.

That said, businesses who deal directly with consumers should be taking note, taking stock, and readying themselves for the significant changes that are to come. For businesses selling goods/services to consumers in the EU as well as the UK, this process should be undertaken alongside preparations for the incoming Omnibus Directive, which comes into full effect on 28 May 2022 as part of the EU’s “New Deal for Consumers”.

If you’d like to discuss any of the issues discussed above, please do get in touch.