Major reforms to the UK Consumer Protection Regime
14th November, 2024
The Digital Markets, Competition and Consumers Act 2024 (the Act) was passed by the UK Parliament on 25 April 2023 and received Royal Assent on 24 May 2024.
The Act establishes a new and targeted regulatory regime for digital markets, broader UK competition law, and gives the Competition and Markets Authority (the CMA) the ability to impose fines on businesses which infringe consumer protection legislation. One of the key aspects of this new legislation is the repeal and reinstatement of the Consumer Protection from Unfair Trading Regulations 2008 (SI 2008/1277) (CPRs) which currently govern how businesses must treat consumers. It is expected that the Act will replace the CPRs in or around April 2025. This article will examine how the Act will reshape consumer protection in the UK and which commercial practices will be considered unfair under the Act.
Unfair Business Practices
The CPRs were designed to protect consumers from unfair business practices by prohibiting misleading and aggressive commercial conduct. The Act will amend and supplement the current list of commercial practices that are always considered to be unfair (these are known as ‘blacklisted practices’). Many of these stated practices are to be replicated in the Act but, in some circumstances, there will be changes in wording to create a wider application. The Secretary of State for Business and Trade also has the power to supplement this list of unfair practices so it’s likely that additional blacklisted practices will follow to address ever evolving consumer habits and advancements in technology.
It is proposed that the Act will see the addition of the following practices that will always be considered unfair:
- Fake reviews: Submitting or commissioning fake reviews together with the publishing of reviews without taking reasonable and proportionate steps to prevent the publication of the reviews.
- Drip pricing and hidden fees: The expansion of the existing prohibition on drip pricing and hidden fees. Drip pricing is where consumers are shown an initial price whilst additional fees (which are unavoidable to the consumer) are added at a later stage in the purchase. The Act will require the total price (e.g. the inclusion of any applicable fees, taxes or charges and how these will be calculated) to be stated upfront
It is expected that the Act will, in the future, facilitate the regulation of ‘dark patterns’, whereby traders use e-commerce strategies that are intent on manipulating consumers into making decisions that they are likely not to have made if options were presented in a fair manner.
Subscription contracts
Subscription contracts are contracts which automatically renew for an indefinite or fixed period and where consumers incur liability under the subscription contracts until the consumer terminates the contract. The Act will introduce new provisions to address the growing issue of subscription-based services whereby businesses use auto-renewals that are difficult to cancel. The new rules will require businesses to make it easier for consumers to cancel subscriptions and will mandate clear and upfront information about renewal terms and costs.
For businesses offering subscription services, this will require clear and user-friendly processes for consumers to opt-out or cancel their subscriptions. This is likely to increase operational costs for B2C businesses, but it will also foster greater consumer trust and loyalty. For example, traders will need to provide consumers with:
- Key and full pre-contract information: including the provision of specific information so that consumers understand the nature of the contract, how prices may be changed and how to terminate the subscription contract and the notice required.
- Cooling off period: where consumers can request a refund without reason or penalty for the first 14 days after purchase
- Reminder notices: the provision of reminders in relation to renewals and terminations of contracts g. before the end of a discount period or free trials and at certain intervals; and
- Rights of termination: to allow consumers to terminate the subscription contract in a simple and accessible way.
It is currently expected that reforms to subscription contracts shall commence no earlier than Spring 2026.
Strengthened Enforcement Powers for Regulators and Consequences of Non-Compliance
Where traders do not comply with the Act, the Act significantly enhances the powers of the CMA to enforce the consumer protection regime. The CMA will gain the ability to issue fines for breaches of consumer law, rather than having to go through lengthy court procedures. This will allow the CMA to respond more swiftly to consumer harm, enhancing deterrence against unlawful commercial practices.
The CMA will have the power to impose the following financial penalties:
- £300,000 or up to 10% of a business’s annual global turnover (whichever is higher) for breaching consumer laws;
- £150,000 or up to 5% of a business’s annual global turnover (whichever is higher) for failure to comply with a direction;
- £30,000 or up to 1% of a business’s global turnover (whichever is higher) for non-compliance with information requests or providing materially false or misleading information to the CMA in the course of an investigation
The CMA may also impose additional daily penalties for each day the non-compliance continues. This could be up to 5% of daily global turnover or £15,000 (whichever is higher). Directors, managers and other senior employees may also be fined up to £30,000 for non-compliance with consumer protection laws.
Next steps for businesses
Businesses should ensure that they are familiar with the details of the Act and carefully assess the application of the Act to all parts of their businesses and consider any areas which might be non-compliant.
It is especially important for traders who sell on e-commerce platforms that prices advertised are transparent in respect of all costs to the consumer and that reasonable and proportionate measures are in place to prevent fake reviews. Traders who sell subscription based products or services must ensure that mechanisms are in place that provide all required information and notifications.
The Act represents a significant evolution in the UK’s consumer protection regime and marks a strong move toward curbing aggressive business practices , empowering regulators with greater enforcement powers and safeguarding consumers in a complex online marketplace. For B2C businesses, the Act will require careful attention to compliance, particularly in the areas of online reviews and subscription services. However, those businesses that embrace the new standards and use them to build trust with consumers could find themselves in a stronger position in the long term.
If you would like any further advice or guidance in relation to the above, please contact Susan Honeyands or Lucy-Beth Pearl.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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