UK government consults on new consumer protection and competition laws

July 22, 2021

The UK government is consulting on introducing new consumer protection laws.  It says there is a strong foundation of competition and consumer rights and regulatory powers, but they do not go far enough to keep pace with innovation. Therefore, it is consulting on changes. The consultation deals with three themes: 

  • promoting competition to drive enterprise, innovation, growth, and productivity;
  • updating consumer rights to keep pace with markets; and
  • strengthening the enforcement of consumer law by individuals and regulators.

The government says that there are two main developments where consumer rights need to be improved: the rise in online shopping; and an increase in subscription contracts. Therefore, it proposes a series of updates to consumer rights to keep pace with these developments:

  • Tackling subscription traps by strengthening and clarifying the law on pre-contract information so that consumers know what they are signing up for and are given a choice on auto-renewal; nudging consumers so they are aware of ongoing subscriptions; and making it easier for consumers to terminate subscriptions.
  • Preventing online exploitation of consumers – strengthening the law to better prevent posting of fake reviews online; and championing ‘fairness by design’ principles in how online transactions are presented.
  • Better prepayment protections – strengthening prepayment protections for consumers by amending the law to require that consumer prepayment schemes like Christmas savings clubs have means to safeguard customers’ money, for example, through insurance or trust accounts.

As well as these changes, the government also proposes changes to enforcement.  Firstly, it proposes stronger enforcement powers for enforcers:

  • the CMA should be able to decide for itself where consumer law has been breached, which is an approach mirroring their abilities in competition law enforcement. The government is seeking views on the scope, decision-making process, and appeals process of this system, including “appropriate safeguards” for traders;
  • testing the case for extending these powers and abilities to economic regulator;
  • fines of up to 10% of global turnover for traders that breach consumer protection law;
  • sanctions for traders that seek to frustrate, delay, or otherwise not comply with the enforcement process including flouting information gathering powers and breaching undertakings;

It also wants to supporting consumers and traders to resolve more disputes independently, and improving access to arbitration and mediation services and seeking views on making it easier for consumers to work together to seek redress collectively from traders. The government also wants to support local authority trading standards services tackling rogue traders and the consultation asks how national and local enforcement can work together to tackle national scams.  

On the competition side, the government’s plans would allow the CMA to:

  • impose stronger penalties for companies that do not comply with its investigations or orders, with new powers for fixed penalties of up to 5% of annual turnover and additional daily penalties up to 5% of daily turnover while non-compliance continues;
  • disqualify company directors who make false declarations to the regulator;
  • accept voluntary binding commitments from businesses at any stage in its investigations, rather than having to wait till the end – with the aim of quicker outcomes and reduced costs for both businesses and the regulator; and
  • block a wider range of harmful mergers, including so-called ‘killer acquisitions’ where big businesses snap up prospective rivals before they can launch new services or products.

The consultation ends on 1 October 2021.