Consultation sets out sweeping reform of consumer protection law - Gordon Downie

In July, the Department for Business Energy and Industrial Strategy (BEIS) published a consultation document setting out proposals for sweeping reforms of the UK’s competition and consumer protection law and inviting responses by October.

Gordon Downie is a Partner, Shepherd and Wedderburn

A separate consultation, also published in July, sets out a vision for the UK’s new pro-competition regime for digital markets, to tackle the unique challenges of fast-moving digital markets and the powers of the new ‘Digital Markets Unit’ within the Competition and Markets Authority (CMA).

BEIS is consulting on a five-point plan to update the UK’s competition regime. The proposals aim to provide a more efficient, flexible and proportionate market inquiry process; ‘Rebalance’ the merger control regime by increasing the turnover test threshold from £70 million to £100 million; Reform CMA reporting panels to create a smaller, more dedicated pool of panel members to help speed up cases; Strengthen enforcement through: greater incentives for businesses and individuals to inform the CMA of unlawful anticompetitive conduct; Strengthen investigative and enforcement powers across competition tools with, for instance, stronger powers to obtain information and sanction companies.

BEIS considers the consumer law enforcement system generally works and has delivered significant benefits. However, it sees remaining weaknesses which undermine consumer confidence and expose traders to unfair competition.

One eye-catching proposal gives the CMA (and possibly other regulators) power to decide for itself where consumer law has been breached (mirroring its competition law enforcement powers) and impose fines of up to 10 per cent of global turnover for traders breaching consumer protection law.

BEIS has identified two main d evelopments where there is an opportunity to update consumer rights. The rise of online shopping, accelerated by the pandemic, means websites are increasing the collection and use of consumer data. While subscription contracts can be a convenient, low-cost way to purchase goods, services, and digital content, there are issues with subscriptions auto-renewing, sometimes indefinitely.

To keep pace with these developments, it proposes three key steps. To tackle subscription by strengthening and clarifying the law on pre-contract information so consumers know what they are signing up for and given a choice on auto-renewal; nudging consumers so they are aware of ongoing subscriptions; and making it easier for consumers to exit subscriptions.

It also proposes to prevent online exploitation of consumers by strengthening the law to better prevent posting of fake reviews online and championing fairness in how online transactions are presented.

The final proposal is to strengthen prepayment protections for consumers by amending the law to mandate that consumer prepayment schemes, (like Christmas savings clubs) have means to safeguard customers’ money e.g., through insurance or trust accounts.

Gordon Downie is a Partner, Shepherd and Wedderburn