News & Views

New consumer protection rules on the way for those selling to the public

On 24 May 2024, the Digital Markets, Competition and Consumers Act (DMCC) Bill received Royal Assent after a tough passage through the legislative process and it comes into effect later this year.

As its name suggests, this new legislation touches on several important areas of business practice. One of the key areas will be the introduction of the concept of ‘strategic market status’ for entities of a certain size or market share, which will particularly impact large tech entities that operate ‘digital activities’ within the UK. We will cover this in a separate article.

The focus of this article is on the impending changes to consumer protections, which businesses who sell to the public will need to be prepared for.

Enhanced enforcement powers

The legislation will increase the powers and devolved authority given to the Competition and Markets Authority (CMA). Currently, in the consumer space, the CMA must obtain court authority to enforce its decisions. When the DMCC comes into effect, the CMA will be able to make binding decisions as well as impose fines on non-compliant business equivalent of 10% of their turnover. This will cover the DMCC’s new rules concerning online safety as well as existing rules concerning false advertising or unfair contract terms in consumer contracts.

Improved consumer protections

Building on recent decisions by the CMA, the DMCC provides for the following protections now guided by legislation:

• A ban on fake reviews - All reviews must be genuine reviews created by customers and genuine third parties who have used the goods or services. This includes not concealing the fact that consumers have received some form of incentive to leave their review. Businesses will also need to have swift and simple means to remove any prohibited reviews.
• Transparency on subscription services - Tempting discounts or free trials that run on into full price subscriptions will need to be more transparent in the contract terms including details on the nature of the contract, reminders in advance of automatic renewals, and simpler contract exit plans.
• Secondary ticket market - The CMA has been given greater power to enforce existing legislation and practice around unfairly inflated ticket prices but does not go as far as the DMCC bill’s original wording that would have imposed licences and/or price restrictions.
• Prevention on drip pricing - Consumers must be presented with a total price upfront, where possible, rather than being presented with a single, low fee, which is then added to throughout the purchase process.

What should businesses do to prepare for the changes?

Businesses who sell to consumers need to be aware of the changes and seek a specialist legal review of their online trading contracts and procedures to ensure compliance with the new rules.

Other things to consider

The DMCC is not, of course, the only legislation making an impact in this area. The Online Safety Act 2023 (OSA) came into force in October 2023 with some immediate provisions and protections in force and with various consultations under way to enable the relevant authorities (in particular Ofcom) to publish supporting codes of practice.

UK businesses will also need to consider their legislative requirements on a European level as the Digital Services Act 2022 (DSA) is now live and applies to all platforms (effective 17 February 2024). This enshrines numerous online protections for consumers within the EU relating to targeted advertising including (a) a ban on targeted advertising methods toward children (b) a ban on the use of special categories of personal data for targeted advertising and (c) the need to provide transparency over the identity of advertisers and the methods, cookies, and consents they have used to target customers with the advertisements.

It is worth noting that, whilst the DSA is live in Europe, the UK is likely to mirror the EU doctrine internally so that it can still compete with and comply with markets on a European level. Given that Ofcom will also be looking at the market in general when creating their code of practice under the OSA, now is the time for businesses to look at their current practices and prepare themselves for future compliance on a commercial and consumer level.

For further information, please email Mark Hughes or call 0151 906 1000.