After lengthy delays, the UK Government introduced the Digital Markets, Competition and Consumers Bill into Parliament on 25 April 2023. If enacted, the bill will make significant changes to UK consumer protection law, as well as to UK competition law (which is covered in a separate briefing) and allow for enhanced regulatory oversight of major digital "gatekeepers".
The headline change to consumer protection law is that powers to enforce breaches of consumer protection law will be significantly enhanced. In particular, companies could face fines of up to 10% of group global turnover for breaches of consumer protection law. This means that companies that breach UK consumer protection law could face equivalent fines to those that can be imposed for serious breaches of competition law, for example participating in a price-fixing cartel, and that exceed those that can be imposed for a breach of the UK GDPR.
The UK already has a well-established body of consumer protection law regulating how traders are permitted to deal with consumers, including the Consumer Rights Act 2015, the Consumer Credit Act 1974 and the Consumer Protection from Unfair Trading Regulations 2008.
The bill would not, in general, substantially alter this body of law, although there are some notable changes, including:
- The revocation of the Consumer Protection from Unfair Trading Regulations 2008, and its replacement by a new chapter in the bill on protection from unfair trading. This new chapter would, in particular, prohibit "inertia selling", where a trader provides unrequested items to a consumer, and then attempts to make them pay for them.
- The introduction of new rules governing subscription contracts and "cooling-off" periods.
- The introduction of new rules governing consumer savings schemes.
Where the bill is likely to have most impact is the rules it introduces on how existing consumer protection law can be enforced by the Competition and Markets Authority (CMA), courts, and other "designated enforcers". These rules appear to be framed to provide for both maximum oversight and maximum impact.
Broadly, the rules would allow for commercial practices – any act or omission relating to the promotion or supply of products - by traders that are "relevant infringements" to be enforced. "Relevant infringements" are those which:
- Harm the collective interests of consumers
- Have a connection to the UK
- Breach a specified condition set out in an item of a wide range of UK consumer protection legislation
The bill is drafted broadly, and, for example, a trader could commit a relevant infringement in relation to the promotion or supply of another trader’s products or if it directs activities to consumers in the UK, even if it is not established there and has no physical presence there.
The extent of the enforcement powers will depend on which item of consumer protection legislation is being breached.
For certain items of consumer protection legislation "Chapter 3" Consumer Protection Orders and Undertakings powers will exist. These powers will allow "designated enforcers" to apply to the courts to make an enforcement order in relation to a relevant infringement. The courts, amongst other things, will have the power to make enforcement orders which may include a fine of up to 10% of the group global turnover of the infringer, and may also order (or accept an undertaking) that "enhanced consumer measures", which can include the payment of compensation to affected consumers, are taken. Alternatively, designated enforcers may accept undertakings instead of applying to the court. Such undertakings may include enhanced consumer measures, including the payment of compensation, but designated enforcers will not be able to apply penalties directly under "Chapter 3".
For other items of consumer protection legislation "Chapter 4" CMA direct enforcement powers will exist (for certain items both Chapter 3 and 4 powers will exist). These powers will allow the CMA to directly enforce relevant infringements, and impose monetary penalties, without having to apply to the courts. The CMA will have extensive powers and will, amongst other things, be able to impose fines of up to 10% of group global turnover on infringers or penalties of £300,000 for infringers who are individuals. It will also be able to direct infringers to take enhanced consumer measures, which could include the payment of compensation to affected consumers. The CMA would also be empowered to punish breaches of undertakings given to the CMA by imposing penalties: up to 5% of group global turnover or £150,000 for individuals. Providing false or misleading information to the CMA could be met with a penalty equivalent to 1% of group global turnover or £30,000 for individuals. If the bill is passed, the CMA will be required to publish guidance on how it will use these direct enforcement powers.
Assuming that the consumer protection provisions of the bill are enacted, it remains to be seen how extensively the new powers will be used and, in particular, how significant fines will be in practice. However, the UK’s approach, which exceeds the approach taken by the EU in the Enforcement and Modernisation Directive, suggests that the new rules are likely to be actively enforced.
Jeremy Kelly