Major changes to sanctions on businesses for consumer law breaches have been brought in as part of the pre-election parliamentary ‘wash-up’ process.

These form part of the Digital Markets, Competition and Consumers Act (DMCCA), expected to come into force this autumn, bringing a suite of reforms to UK consumer law that will affect many businesses operating in the UK.

The ways in which businesses interact with consumers has radically evolved in the past decade, and the DMCCA aims to bring the consumer protection regime in line with that of competition law, with more direct monitoring and enforcement from the Competition and Markets Authority (CMA).

The headline change is a new power on the CMA to impose significant penalties on businesses in breach of UK consumer laws.

The new regime allows the CMA to investigate alleged breaches and require organisations to take remedial steps such as website changes or even payment of financial redress to consumers.

However, it is the CMA’s new power to issue fixed penalty notices of up to £300,000 or 10% of annual turnover (whichever is higher) that will be of most significance to businesses manufacturing, distributing, advertising, or selling products and services to UK consumers.

In addition, if a business does not comply with a CMA enforcement order or court order then further fines may be imposed (up to £150,000 or 5% of annual turnover).

This represents a major change as, to date, the CMA has only been able to enforce consumer laws via the courts – a process typically reserved for only the most egregious breaches. From a consumer perspective, the CMA’s ability to order compensation could negate any need to bring litigation against companies who they allege have broken consumer law. While some muse that this may herald a drop in consumer claims generally, individuals may still bring litigation for losses they claim have not been recovered via a CMA order, so businesses should be alive to the possibility of breaches resulting in both investigation and litigation.

By and large, the DMCCA replicates a well-established list of unfair practices from existing legislation, such as misleading advertising and use of aggressive sales techniques, but also includes two additional prohibited practices.

The first is ‘drip pricing’, a tactic whereby consumers are shown an initial price, with additional charges being added later in the transaction process. Going forward, traders will have to be more upfront and transparent about total costs.

The second is around fake reviews, meaning businesses will need to take "reasonable and proportionate steps" to prevent fake reviews and avoid misleading presentation of reviews more generally.

The DMCCA also introduces new regulations for subscription contracts, often used for gym memberships, food delivery boxes and streaming platforms.

It places a greater onus on organisations to notify consumers and provide an opportunity to opt-out when introductory offers end and prior to each renewal payment. Certain pre-contractual information must also be provided before the consumer signs up.

While some exceptions apply for utilities, financial services and healthcare subscriptions, this will impact several online consumer-facing businesses who rely on subscription models to maintain customer engagement.

The DMCCA represents the biggest change to UK consumer laws in nearly 10 years, and preparation is key. In practical terms, there are specific changes that businesses selling online or offering subscriptions may need to make to documentation, and all consumer-facing businesses should review their customer journeys and terms and conditions to ensure they are compliant with the new requirements. Failure to do so could be costly.

If you want to discuss any points made in this blog or the wider changes coming as part of the DMCCA, please get in touch with Pauline McCulloch or Jo McLean.

This article was first published in The Scotsman on 24^th June 2024.

Related News, Insights & Events