The UK’s consumer law regime: the CMA proposes bold new powers

As highlighted in our earlier blog post, the UK Competition and Markets Authority (CMA) has published a series of proposed reforms to the UK’s enforcement regime in relation to both competition and consumer law. The recommendations, which are set out in a letter from Lord Tyrie, the Chairman of the CMA, to Greg Clark, the Secretary of State for Business, Energy and Industrial Strategy, are wide-ranging and would fundamentally change how consumer laws are enforced in the UK. 

According to Lord Tyrie, the review has been prompted by newer forms of consumer detriment, particularly as a result of digitisation, and signs that the public is increasingly doubtful that markets are working for their benefit. The harvesting of personal data and personalised pricing that takes advantage of vulnerability were listed as two specific areas of consumer detriment that concerned the CMA.

The most fundamental change proposed by Lord Tyrie is for the CMA to be bound by a statutory duty to protect the economic interests of consumers. The CMA’s current duty is to “promote competition … for the benefit of consumers”. This shift in language is significant and, together with the other proposals set out in the letter, would encourage more direct and forceful intervention by the CMA. Notably, the proposals also recommend that the relevant courts are bound by the same duty in relation to consumer law issues. Again, this extension of the duty to the courts appears aimed at emboldening the CMA to intervene and reducing the likelihood of CMA decisions being successfully challenged.

To assist in fulfilling the proposed statutory duty, the proposals also recommend bolstering the CMA’s ability to enforce existing consumer laws, bringing them more in line with its competition law powers. The proposals are bold in their criticism of the CMA’s current powers, labelling them “unfit for its current purpose” and “far short of what would be required” if a new statutory duty is introduced. Specifically the proposals include:

• strengthening the sanctions available to the CMA. In particular, these would allow the CMA to declare publicly whether consumer laws have been breached, direct businesses to stop the infringing practice and impose fines itself, without needing to go to court. Currently, the CMA is required to apply to the courts for such remedies to take effect. Under the new proposals, the CMA’s decision would then be subject to appeal, as is the case with its competition decisions.
• interim measures. The proposal would allow the CMA, in urgent cases, to order the cessation of practices that it suspects to be harming consumers, pending a final decision on whether the law is broken.
• greater responsibility on individuals to ensure their organisations’ compliance with consumer law. Lord Tyrie raises the possibility of a power to seek disqualification of directors for breaches of consumer law although admits that any such powers would need to be carefully considered. The proposals also include a requirement for companies to appoint a board director responsible for assessing and reporting on consumer law risks. A similar requirement for auditors to report on any practices that raise consumer law risks is also raised as a possibility.
• a legally-entrenched division of responsibility for consumer law enforcement between the CMA and Trading Standards. The proposals do not go into detail on where exactly the division would lie or if there would be a change from the current status.

Although they are at a very early stage, the proposed reforms are wide ranging and would have a considerable impact on the enforcement of consumer protection legislation in the UK. They also indicate that, regardless of whether all or part of these proposals become law, the CMA is focused on consumer protection as its priority.

Please get in touch if you would like to discuss the proposals, next steps or potential implications for consumer law risk management.