Increased enforcement powers for the UK regulator point to greater alignment of consumer protection and competition regimes.

Recent reports suggest that the UK competition regulator, the Competition and Markets Authority (CMA), will next year be given increased consumer protection powers, suggesting that the government is supportive of the UK regulator’s calls to align the UK’s competition and consumer protection regimes more closely.

What happened?

Reports that the CMA is to receive more extensive consumer protection powers come as little surprise given the clear messages that have come from the CMA this year about its future vision and, in particular, its assertion that increased consumer protection powers are necessary for the regulator to tackle a perceived decline in consumer confidence in how markets are functioning.

As we previously reported, the CMA in February put forward a clear mission statement for change as part of a set of proposals submitted to the Department for Business, Energy and Industrial Strategy (BEIS). While the proposals were far-reaching and sought reforms across a number of the CMA’s different areas of responsibility, of particular note was the comment by the CMA chair, Andrew Tyrie, that the “central challenge” for the regulator in the digital age was that the “UK has an analogue system of competition and consumer law“.

The suggested reforms included a proposal that the CMA’s current statutory duty to “promote competition, both within and outside the United Kingdom, for the benefit of consumers” be dropped in favour of the CMA being subject to an overriding duty to treat consumer interest as paramount. This duty would be backed up by more extensive consumer protection powers.

Reports now suggest that these proposals have found favour with the government and that a package of reforms will be introduced by BEIS early next year.

What changes are expected?

At present, it is unclear exactly what powers the CMA will receive. However, the reports suggest that the package will contain protection for vulnerable consumers and give the CMA direct powers to act to enforce consumer protection law – currently, the CMA is required to apply to court if businesses are breaching consumer protection law in order for enforcement action to be taken. If BEIS accepts the recommendations set out in the CMA’s February proposals, its new powers will enable the CMA to:

  • make determinations on whether consumer protection law have been broken and declare the fact publicly;
  • direct business to bring infringements to an end;
  • impose fines directly on business for breaches of consumer protection law;
  • impose fines on businesses for failure to comply with undertakings in respect of consumer protection law; and
  • use interim measures to address suspected breaches of consumer protection law.

Osborne Clarke comment

While the CMA’s new consumer protection powers have yet to be confirmed, BEIS is clearly keen to ensure that the CMA’s consumer powers are significantly strengthened and appropriately aligned with the CMA’s future vision. In other words, a potentially radical shake-up of the CMA’s traditional role appears to be on its way.

The strong message from the CMA this year as reflected in its proposals to BEIS and reiterated by Mr Tyrie in a speech to the Social Market Foundation is that the current strategy of protecting consumers mainly through the lens of competition law is not enough to protect consumers adequately.

In doing so, the CMA is drawing on concerns around the adequacy of competition law to tackle particular features of modern markets effectively and, in particular, the ability of competition law to intervene in fast-moving digital markets. This is not a UK-specific issue; the effectiveness of competition law in the digital age is being discussed by competition authorities and commentators worldwide. The proposals put forward by the CMA earlier this year – along with the recommendations produced by the separate government-commissioned review of digital markets – reflects the UK government’s attempt to understand and tackle these concerns.

The CMA’s proposed shift towards direct consumer protection is potentially a radical one; the relative ease of proving a breach of consumer protection law compared to proving a breach of competition law may herald a significant increase in consumer enforcement action by the CMA.

We await confirmation of the precise shape of these new powers, as well as the outcome of BEIS’s review of the CMA’s proposals and the recommendations that came out from the Furman Review. In the meantime, businesses – and in particular those in sectors such as energy, construction and the e-commerce sector where consumer detriment is already under the spotlight – should be aware that the CMA may emerge in 2020 as a regulator with several sharp new teeth.