Consumer protection and competition lawyers alike have been waiting with bated breath for the long anticipated updates to the UK’s competition and consumer law regimes, as announced in the late Queen’s speech last year. A first draft was finally published in the shape of The Digital Markets, Competition and Consumers Bill (DMCC Bill) last month. The DMCC Bill had its first reading in Parliament on 25 April and has promised to give the Competition and Markets Authority (CMA) new, targeted powers to drive competition and protect consumers.
In a previous article on the 10 things you need to know about the DMCC Bill, our colleagues outlined key changes that could shape UK competition law enforcement for many years to come. In this article, we take a deep dive into the five most interesting proposed consumer law changes, as set out in Parts 3 and 4 of the DMCC Bill. Whilst the Bill appears to introduce sweeping changes to consumer protection laws, when taking a closer look, many of the changes consolidate existing legal requirements, as well as codifying the CMA’s current guidance – and previous decisions – about the application of the UK’s consumer protection laws.
1. Subscription traps
A key addition envisaged by the DMCC Bill is the introduction of specific provisions to protect consumers from subscription traps. The DMCC Bill proposes a statutory definition of a “subscription contract”, as well as a list of contracts excluded from the new provisions (e.g. contracts for the supply of electricity and gas). Certain obligations are imposed on traders, such as:
a) a duty to provide “key information” before the consumer enters into the contract;
b) a duty to provide further “full pre-contract information” separately;
c) additional requirements for contracts entered into online;
d) a duty to send reminders to consumers before the contract auto-renews;
e) implementing a simple processes for consumers to cancel if they don’t want to auto-renew;
f) a duty to inform consumers once payment has been taken; and
g) enhanced cooling off rights following renewal of a subscription contract, including the option to obtain a refund.
But how much of this is really new? The CMA has already been interpreting existing UK consumer laws to impose similar obligations on UK traders, as evidenced by the various investigations launched into auto-renewing contracts in the financial, telecoms, computer anti-virus software and online video gaming sectors. For example, as part of its investigation into auto-renewing contracts in the anti-virus software sector, the CMA published a number of “Compliance Principles” in October 2021 that look remarkably similar to the new requirements to be imposed under the DMCC Bill. For UK traders who have considered the CMA’s guidance already – and indeed for the subjects of the CMA’s previous investigations – these duties have been in place for a number of years. It is encouraging to see that the DMCC Bill has picked up on these principles and provides further clarity on when these apply.
Notably absent from the DMCC Bill is a requirement in the Compliance Principles for traders to monitor inactive subscribers and to specifically ask whether they would like to continue or cancel their subscriptions periodically. Such a requirement would likely be onerous in practice but it remains to be seen whether it will ultimately find its way in to this legislation.
2. Fake reviews
The Government also appears to recognise that fake reviews are a problem to be addressed (and highlights this in a press release on the Bill), but has largely side-stepped the topic in the current draft of the DMCC Bill. Instead of outright banning the commission of fake reviews and placing a duty on traders to check reviews, the DMCC Bill proposes granting the Secretary of State the power to amend secondary legislation to this effect. We will be keeping an eye out on how this issue evolves in the future.
3. Unfair trading practices will still be prohibited
The provisions protecting consumers from unfair trading contained in Chapter 1 of Part 4 of the DMCC Bill largely maintain the status quo. If adopted in its current form, the DMCC Bill will revoke the Consumer Protection from Unfair Trading Regulations 2008 and largely re-state the offences of engaging in unfair commercial practices involving misleading actions; misleading omissions; and aggressive practices, or contravening the requirements of professional diligence. The defined terms and principles underpinning these offences, as drafted, will not change in a material way.
The biggest change in Chapter 1 is the introduction of a separate offence of omitting material information from an invitation to purchase, which would currently be considered a misleading omission, and a new power for the Secretary of State to amend the list of commercial practices that are automatically considered unfair.
4. Consumer savings schemes
The DMCC Bill envisages new protections for consumers who join consumer savings schemes, such as Christmas savings clubs. Traders would be required to ring-fence or insure funds paid in by consumers, in order to protect consumers from the trader’s insolvency. Alongside this, there is a duty to inform consumers about the safeguards the trader has put in place in relation to those funds.
5. Alternative Dispute Resolution
Finally, the DMCC Bill proposes new requirements for alternative dispute resolution (ADR) providers in relation to consumer contract disputes, including an accreditation scheme. Where a consumer has raised a complaint, traders will be under an obligation to inform consumers of any ADR schemes that are available to them when communicating the outcome of that complaint. Again, this notification requirement is a restatement of an existing legal position. Similar obligations already exist in the Alternative Dispute Resolution for Consumer Disputes (Amendment) Regulations 2015, which the Bill proposes to revoke.
The second reading of the DMCC Bill is scheduled to take place on 17 May 2023, so the new bill may have some way to go before it becomes law. Given the proposed new role of the CMA in enforcing consumer law (discussed in our previous article here), it may be a good time for businesses to re-consider their current practices. After all, infringing undertakings may be fined up to 10% of their worldwide turnover if, and when, the DMCC Bill passes.