The Government has announced, in the Modernising Consumer Markets Green Paper, a package of proposals aimed at ensuring the UK's regulatory framework meets the challenges of modern consumer markets, and supports both innovation and rights of consumers. There is now a 12 week consultation period with a deadline of 4 July 2018 for responses.
The Green Paper covers a wide range of issues which affect a number of industry sectors. In this article we focus upon the key proposals most relevant to the retail sector with an emphasis upon the proposals aimed at strengthening consumer rights and enforcement powers for regulators in respect of consumer law issues.
The Green Paper seeks views, in summary, in relation to the following issues:
- Getting consumers better deals and better service in utilities markets
- Helping consumers benefit from their data and remain protected when they buy and sell online
- How to improve the system of alternative dispute resolution (ADR)
- How to improve consumer understanding of terms and conditions and privacy notices
- How to support enforcement authorities to protect consumers and the strengthening of their enforcement powers.
Overview of key proposals for retailers
Simpler terms and conditions
The concern is that consumers do not always understand what they have agreed to when accepting a contract, typically terms and conditions of sale (T&Cs), or privacy notice. Research shows that less than 1% of consumers open the T&Cs when purchasing goods and services online.
Businesses are encouraged to use short and simple T&Cs as they are more likely to be understood by consumers as well as to undertake regular reviews to ensure that consumers can understand the key facts.
The Green Paper refers to studies that have shown that the way in which T&Cs are presented can significantly improve consumer comprehension and seeks views on whether businesses in certain sectors should be required to ensure that there is a minimum level of comprehension:
"Should terms and conditions in some sectors be required to reach a given level of comprehension, such as measured by online testing?"
Good practice guidance will be published for businesses on presenting T&Cs and privacy notices online based upon the results of behavioural testing.
Reducing the use of unfair terms
Research has shown that a significant percentage (54%) of businesses are not familiar with the law in relation to unfair terms. The Competition and Markets Authority is therefore continuing to work, with other regulatory bodies, to improve compliance and reduce the use of unfair terms in consumer contracts, typically concerning deposit and advance payments, cancellation charges, exclusions of liability and asking customers to agree to privacy rules/data use.
Tackling subscription traps
Concerns remain in relation to online subscriptions services which are increasingly common. Key problems which have been highlighted include unclear T&Cs, misleading information and difficulties with unsubscribing from a service.
Further work will be undertaken by the Consumer Protection Partnership to recommend actions required to make it easier for consumers to cancel unwanted subscriptions, including free trials, and to avoid unreasonable charges and being charged unexpectedly. It will consider options such as explicit nudges, removing automatic opt-ins for paid services, targeted enforcement or regulatory action.
Resolving consumer disputes - ADR
In non-regulated markets where ADR is voluntary, such as general retail, research has shown that very few businesses participate in the ADR process in order to try and resolve disputes with their customers without going to court. It is reported, for instance, that businesses agreed to participate in only 6% of cases received by The Consumer Ombudsman.
The Government is consulting on how to make ADR more accessible and simpler for consumers, and how to incentivise more businesses to participate in ADR.
It has asked for views on whether businesses in non-regulated sectors should be given a choice of ADR provider amidst concerns that it confuses consumers, and would like to understand the challenges faced by groups of consumers, particularly vulnerable groups of consumers, when considering ADR.
Consumers are often forced to abandon legitimate complaints and the Government believes that mandatory ADR should be considered for sectors where there are high levels of high value complaints such as second hand cars and home improvements.
The Government wants to ensure that the enforcement regime in relation to consumer protection issues provides a robust response to both local and national threats.
There will be a focus on stronger enforcement in relation to scams, unfair trading and e-crime. Legislation will also be introduced to allow financial penalties to be imposed on companies in breach of consumer laws up to 10% of worldwide turnover. In the area of product safety, the Government will look at options for making the Office for Product Safety and Standards an independent body, subject to public consultation.
The Government recognises concerns relating to consumer confidence and protection following the UK's exit from the EU and is committed to maintaining existing consumer rights through the European (Withdrawal) Bill, following negotiations.
- Digital innovation: the Government is consulting on the practice of personalised pricing and reviewing how data portability can benefit all consumers in regulated markets such as telecoms
- Driving better performance by suppliers in regulated markets: the Government is seeking views on how to maximise the use of performance metrics or scorecards to incentivise companies to improve performance in sectors such as telecoms, energy, water and financial markets
- Protecting the vulnerable: the Government will work with regulators in sectors such as telecoms, energy, water and financial services, to prevent harm to vulnerable consumers and encourage companies to have policies and processes for supporting the vulnerable, particularly given technological changes such as the use of comparison tools
- Competition to drive innovation: the Government will carry out a statutory review of the existing competition regime to ensure it is working effectively and further support the CMA to promote competition for the benefit of consumers and business.
Members of our dedicated retail team would be happy to discuss any of the issues raised in the Green Paper and assist with drafting any responses before the deadline on 4 July.