Last week the Government has announced an “arsenal” of planned reforms to boost competition and enhance consumer rights.
The proposals, which are set out in the consultation paper Reforming Competition and Consumer Policy, cover three areas: competition policy, consumer rights, and consumer law enforcement. The ambitious reforms “seize the opportunity of the UK being able to chart its own way” post Brexit and deliver on the ambitions set out in both the 2018 Consumer Green Paper and the more recent Penrose report on competition policy.
As anticipated, BEIS proposes handing beefed-up enforcement powers to the CMA, which would enable it to impose huge administrative fines (up to 10% of global turnover) on businesses that breach consumer protection laws. This would bring the CMA’s consumer law enforcement powers in line with its powerful antitrust enforcement toolkit, and is seen by many as a ‘game changer’ that would greatly increase the risk of retailers and other consumer brands facing multi-million pound fines in cases where they are deemed to have misled consumers.
Beyond this, there are a series of potentially significant reforms spanning both consumer and competition law enforcement. In the coming weeks we will be unpacking these changes in a 3-part series of articles. For now, the headline changes are summarised below.
Consumer law enforcement
Although the consultation paper acknowledges that the current system generally works well, it identifies certain weaknesses, which it says are undermining consumer confidence and exposing traders to unfair competition. In particular, the CMA does not have the powers to act quickly to seek solutions for consumers and only weak sanctions are available to deter breaches of the law.
The package of proposed reforms include:
- As noted above, it proposes handing regulators stronger enforcement powers, including allowing the CMA (and potentially other regulators) to decide whether consumer law has been breached independently and impose huge fines – much like the ICO currently does in relation to data protection enforcement. Those fines would then be subject to appeal at a designated court or chamber of the High Court.
- Supporting consumers and traders to resolve more disputes independently by improving consumers’ access to ADR services such as arbitration and mediation;
- Supporting local authority trading standards services tackling rogue traders; and
- Giving businesses the right support and education to comply with consumer protection law.
BEIS is concerned that consumer rights may not be keeping pace with market developments, in particular the rise of online shopping (accelerated by the pandemic) and the increase in online subscriptions. The Government is proposing a series of updates, including:
- Tackling subscription traps by strengthening the law on pre-contract information, giving consumers a choice on auto-renewal and making it easier for them to exit subscriptions;
- Preventing online exploitation of consumers by preventing the posting of fake reviews online and championing ‘fairness by design’ principles; and
- Better prepayment protections by mandating that consumer prepayment schemes (such as Christmas savings clubs) have means to safeguard customers’ money.
BEIS also expresses concerns that competition in the economy has weakened over the last 20 years. The consultation proposes that a more active pro-competition strategy is now required to deliver more targeted and effective pro-competitive interventions capable of driving new growth and innovation. To deliver this, the consultation sets out the following five-point plan:
- More effective market inquiries to provide a more efficient, flexible, and proportionate process;
- A rebalanced merger control regime with revised turnover thresholds to help reduce the potential burden on small businesses;
- Reforms to the CMA panel to deliver faster and more consistent decisions in merger and market inquiry cases;
- Stronger enforcement against unlawful anticompetitive conduct; and
- Stronger investigative and enforcement powers across competition tools.
Alongside this consultation, the Government has also launched a consultation on a new pro-competition regime for digital markets to tackle the unique challenges in this sector and provide the new Digital Markets Unit with appropriate powers to address the root causes of market power.
There is much to consider within these proposals and we shall be exploring the detail of each of the areas outlined above in a series of subsequent updates. In the meantime, should you wish to discuss the proposals or should you like us to assist you in influencing the competition and consumer protection rules of the future by responding to the consultation, please get in touch. The closing date for responses is 1st October 2021.