Beefing up UK consumer protection law penalties

Businesses that breach UK consumer protection laws will be subject to fines of up to 10 per cent of their annual global turnover under proposed changes to UK legislation.

Angelique Bret, Partner and specialist in consumer law at Pinsent Masons

The plans are part of a broader suit of legislative changes which will bolster the UK’s consumer law enforcement regime. Outlined in a new paper, the proposals will dramatically increase the Competition and Markets Authority’s (CMA) powers in relation to competition law enforcement.

The government has accepted the need to incorporate processes to ensure rights of defence, with the opportunity to make written and oral representations, and allowing access to the CMA’s file. This will impact the speed at which the CMA will be able to take decisions under the new framework.

It is proposed the CMA would be able to impose fines not only on infringing businesses – up to 10% of turnover – but also on individuals of up to £300,000 for a breach of the consumer protection rules. The CMA would be able to require businesses to compensate consumers and make changes to their business practices to improve compliance,

The CMA will continue to be able to pursue both civil and criminal consumer law cases before the courts, and the Government confirmed that it intends to strengthen the courts’ fining powers in this area.

As the CMA will be able to continue to use its existing powers, there may be cases where it tries to secure voluntary undertakings from business to make certain changes to their business models, without the business needing to admit to any infringement of the rules. This could be used for less serious breaches.

Fines of up to 5% of annual global turnover will be able to be levied on businesses that breach consumer protection undertakings they have given, or directions the CMA has issued them, and additional daily penalties of up to 5% of daily global turnover for continued non-compliance could be levied. Individuals could be fined up to £150,000 and £15,000 daily for continuing non-compliance in this context.

The CMA’s information gathering powers will also be strengthened. Businesses will face fines of up to 1% of their annual global turnover for failure to comply with statutory information requests, where they only do so in part, provide false or misleading information, or otherwise destroy, conceal, or falsify information and documents.

New rules in relation to consumer subscriptions are also proposed.

Businesses will have to provide clearer and enhanced pre-contract information requirements for subscription contracts, and to “send reminders to consumers before a contract rolls over (or auto-renews) onto a new term”. Plans to strengthen the law against the posting of fake reviews online were also outlined by the government.

Given the risk of serious penalties, businesses – particularly e-commerce platforms and marketplaces, as these have been a focus for consumer protection enforcement action across the EU – will be encouraged to consider putting in place robust compliance policies and systems for consumer protection law compliance, similar to those in place for competition law compliance.

Angelique Bret, Partner and specialist in consumer law at Pinsent Masons