In brief:
The flagship Digital Markets, Competition and Consumers Bill (the DMCC Bill) is progressing through the Houses of Parliament ahead of its anticipated enactment in the Autumn of 2024. As discussed in our previous blogs here and here, the DMCC Bill will introduce new powers for the CMA to impose large fines on companies which it thinks have breached consumer protection rules. A recent response to a government consultation on consumer information transparency (available here) provides useful insight into the CMA’s key areas of concern around pricing, subscriptions, fake reviews and greenwashing.
In more detail:
The UK’s Department for Business & Trade is currently consulting on five areas of consumer information transparency, with aims to reform legislation to improve the quality and accessibility of information available to consumers and consequent consumer decision-making.
On 16 October 2023, the Competition and Markets Authority (the CMA) responded to the consultation, supporting legislative changes in relation to misleading pricing, fake and misleading reviews, auto-renewing subscriptions and misleading environmental claims. This may indicate its enforcement priorities once the DMCC Bill becomes law.
Hidden fees and drip pricing
- The consultation asked for views on how consumers could be better protected from “drip pricing” – where a headline price for a product or service that is advertised at the beginning of the purchase process differs from the final price, because new fees, taxes and charges get added at different stages of the consumer journey – and other hidden fees.
- In its response, the CMA says it supports clear regulation, rather than guidance, and sees enforcement action as a more effective deterrent to traders. With this in mind, the CMA has said there should be a specific banned practice (i.e. a practice that will be deemed automatically unfair by its inclusion in Schedule 18 of the DMCC Bill) on the drip pricing of all mandatory price elements, as well as of other charges which are ‘optional’ but which the retailer can reasonably foresee the consumer paying.
- It also considers that even truly optional fees should be provided as early as possible during the purchasing process and alongside the headline price.
- Key sectors it has identified as requiring further attention include entertainment (particularly event tickets), transport, food delivery services and car rental.
Auto-renewing subscriptions
- The CMA has long been concerned that consumers do not always understand what they are signing up to when they enter into subscription contracts that auto-renew at the end of the initial subscription period and may find themselves paying for products or services that they do not want, if they forget to cancel in time.
- In its response to the consultation, the CMA says that auto-renewal of recurring payments should be banned outright and should be made a criminal offence, unless the consumer freely and explicitly gives separate and active consent to auto-renewal at the pre-contract stage. This would go significantly further than the DMCC Bill’s current provisions on this subject.
Fake reviews and misrepresenting reviews
- The CMA has said it supports the Government’s proposals to introduce new banned practices in relation to fake reviews and the misrepresenting of reviews. The CMA has also clarified that the prohibition on traders misrepresenting reviews should be clearly distinguished from a requirement for traders to take “reasonable and proportionate steps” to address fake reviews.
- The CMA agreed that “principled-based” statutory guidance should be published to help traders understand their legal obligations, which includes practical examples based on the CMA’s significant enforcement experience. The CMA has said that it would expect to work closely with the Government in producing such guidance.
- In terms of sanctions for offending traders, the CMA considered that the proposed new banned practices on fake reviews should attract criminal liability.
Misleading environmental claims (greenwashing)
- The CMA supports a ban on traders making false claims or creating a false impression about the environmental impact of their products or business, including, in particular, making environmental claims that the trader cannot substantiate.
- The CMA considers that given the clear information asymmetry between traders and consumers in this respect, there is “no justification” for such false claims.
