Strengthening Consumer Law: Crucial changes are coming through the Digital Markets, Competition and Consumers Act 2024

The Digital Markets, Competition and Consumers Act 2024 (the “Act”) received Royal Assent on 24 May 2024. Its focus is to bolster competition in the UK and ultimately, protect consumers. The Act makes significant changes by introducing new obligations and providing direct enforcement powers to the Competition and Markets Authority (CMA). Businesses will need to be aware of the new changes from the outset and adopt a proactive approach to their implementation, crucially to avoid being subject to unwanted penalties for breaches.

This article provides a concise overview of the key reforms to consumer protection law which are expected to enter into force in April 2025 and notably, what you should do to prepare.

Updated commercial practices regime

The Act repeals and reinstates, with some minor amendments, the Consumer Protection from Unfair Trading Regulations 2008 (SI/2008/1277) (CPRs). Many of the unfair commercial practices contained in Schedule 1 of the CPRs (the so called “black-list” of practices) have remained but various new practices have been introduced. These include:

• Drip pricing practices:
  The Act has revised a prohibition under the CPRs to address the issue of drip pricing. Drip pricing occurs when consumers only receive the full costs of the goods/services at the point at which they are committed to making the purchase. Hidden costs are subsequently revealed, and the final price is significantly higher than initially expected by the consumer. Businesses must now provide transparent, detailed cost information (inclusive of all fees, taxes and charges (including delivery charges)) to consumers from the outset. If it is not possible for any of these elements to be calculated in advance, details about them and the method of their calculation must be given the same prominence as the total price.
• Fake reviews:
  The Act prohibits the submission or commission of fake reviews including publishing reviews without taking reasonable and proportionate steps to prevent their publication. At this stage, it is unclear what “reasonable and proportionate steps” amounts to, but we expect to receive guidance from the government and the CMA on this point.

The Secretary of State also has the power to add to the current list of automatically unfair practices through secondary legislation. In effect, consumer laws can be adapted promptly to reflect changes in the market, consumer practices and technology. This was not possible prior to the Act.

Subscription contracts

Consumers are often locked into subscription contracts for indefinite periods through automatic renewal processes. Consumers are also usually provided with minimal information on cancelling the subscriptions they have entered. Whilst the relevant provisions of the Act are not expected to come into force until 2026, it has introduced various key changes to address these issues:

• Pre-contract information:
  Consumers must receive “key” and “full” pre-contract information which includes: details of the contract’s auto-renewal mechanisms, the charges after any initial trial period, amount and frequency of payments, the termination process and notice periods. This information should be provided as close in time to the consumers entry into the contract, as is practicable.
• Reminder notices:
  The Act stipulates that businesses must send out reminder notices to consumers before any automatic renewal. The notice should detail the amount of the renewal payment, details of any pay increases, the amount the consumer has paid since the contract was last renewed, details of how much the consumer will be committed to paying if they proceed with the renewal, the deadline for payment and notification of the consumer’s termination rights.
• Terminating the contracting:
  Consumers must also have a 14-day “cooling off” period following entry into the contract for any reason, with no penalty being levied. Consumers must also be able to cancel their subscription easily without any obstacles. Consumers have a right to cancel their subscription by providing a “clear statement” which specifies their intention to terminate.

Why should I be concerned?

The CMA is the entity which has the authority to investigate infringements of consumer law. Prior to the Act, the CMA would need to initiate court proceeds in order to enforce any breach. As such, it relied heavily on businesses providing voluntary undertakings to prevent any infringing behaviour re-occurring in the future. An infringement of consumer law would essentially mean that a business would merely be subject to reputational risk.

In the event of non-compliance under the Act, the CMA now has the power to directly investigate suspected infringements and practices, and issue enforcement notices without going to court first. The CMA may also impose fines of up to 10% of a business’s global annual turnover or £300,000 (whichever is higher). Of particular note, the CMA will, in certain circumstances, have the power to make a parent company liable for any breaches of consumer law committed by its subsidiaries. The CMA can also impose "enhanced consumer measures" such as redress, compliance, or choice options. As a result, the CMA has significant powers, and this will undoubtedly impact how businesses approach compliance with consumer laws in the future.

Summary

Adopting a proactive approach to the obligations introduced under the Act is crucial. Businesses should i) review their existing practices to assess whether it is necessary for changes to be implemented ahead of April 2025 and ii) consider the consumer journey for the entry into, and termination of, subscription contracts ahead of 2026. If you have any questions or would like to discuss how to best prepare, do get in touch.