Whether you manage a business with a digital presence or are a simple consumer who purchases products online, you need to get to know the new Digital Markets, Competition and Consumers Bill (the Bill).
Set to further regulate competition in digital markets and enhance protections of consumer rights, the Bill is swiftly making its way through Parliament and could be enacted later this year.
Since the Bill is a hefty 400 pages long, here Bernadett Nagy and Mpho Kgatuke outline how three key areas might affect you — from strengthening Competition and Markets Authority (CMA) powers to tackling fake online reviews and subscription traps.
1. Designating strategic market status requirements
Once the Bill comes into force, the CMA will be able to designate ‘strategic market status’ (SMS) to UK-linked companies that carry on digital activities with “substantial and entrenched market power”, a “position of strategic significance” and “annual group turnover exceeding £25bn worldwide or £1bn in the UK”.
SMS-designated companies must comply with a set of behavioural requirements that govern how they interact with consumers and other businesses. These are designed to improve “fair dealing, open choices and trust and transparency”.
The nine-month SMS designation process will include consultation on conduct requirement(s) — with the resulting designation remaining in force for five years (unless revoked earlier). In that time, it may be varied by the CMA and — if challenged by the business — can only be appealed through a process of judicial review.
Those designated with the status are required to comply with specific conduct requirements that the CMA deems appropriate to ensure fair competition in the digital space.
Some key points to note include:
- These conduct requirements will be individually tailored to each business, in contrast with the EU’s Digital Markets Act, which sets out generic measures for how businesses with similar status in the EU must act to maintain fair competition in the digital space.
- While a list of conduct requirements isn’t provided in the Bill’s current form, it does contain a list of “permitted types of conduct” and the “objectives” that the conduct requirements need to comply with.
- The CMA will be able to investigate potential competition issues in digital markets and have broad powers to make pro-competitive interventions (PCIs) to remedy adverse effects on competition. PCIs may include, for example, requiring a designated business to make a specific social media service interoperable with other competitors’ social media platforms.
- Breaches of competition rules (including conduct requirements) will be punishable by the CMA in the form of fines of up to 10% of the company’s global turnover and — in the case of breaches of orders or commitments — up to 5% of daily worldwide turnover for each day that a breach continues.
- The CMA will also be able to make disqualification orders of company directors for up to 15 years, in addition to holding other enforcement powers.
2. Enhancing consumer protection enforcement powers
In most EU Member States, it’s common practice to allow consumers to raise concerns directly with their country’s competition authority.
The new Bill adopts this approach in the UK and will allow consumers to raise issues directly with the CMA to open investigations.
In the spirit of consumer protection, the Bill goes even further:
- The CMA will be granted the power to directly enforce consumer protection law. Currently, it’s only able to enforce indirectly by threatening or making a court application.
- The CMA will be granted the ability to make determinations on whether breaches of consumer law have occurred and impose monetary penalties. Financial sanctions will include a maximum fine of up to 10% of global annual turnover for companies and up to £300,000 for individuals. The CMA will be able to issue fines for breaches of undertakings, non-compliance with notices, breaches of an administrative direction and breaches of infringement notices. However, the powers won’t extend to awards of damages, which will continue to be done through court orders or negotiated undertakings.
Such powers are designed to operate as deterrents for businesses who repeatedly breach consumer protection laws but have to date managed to avoid sanctions due to the timeframes and processes involved in the CMA taking court action.
3.Combatting unfair commercial practices
The CMA is expected to use its powers in relation to unfair commercial practices such as subscription contracts, consumer savings schemes and fake reviews.
Schedule 14 of the Bill provides a helpful list of the relevant consumer legislation that the CMA will have powers to directly enforce. This includes consumer protection rules contained in the Consumer Rights Act 2015, the Consumer Credit Act 1974, the unfair commercial practices currently contained in the Consumer Protection from Unfair Trading Regulations 2008 (which are being incorporated into the Bill) as well as the new consumer protection offences and duties.
New unfair commercial practices will also be added in addition to the 2008 Regulations.
Two key highlights include:
Ending subscription traps
The Bill gives new rights to consumers that enter into subscription contracts with auto-renewal or early cancellation features.
The new provisions will include the requirement to provide certain pre-contract information prominently and clearly. 14-day cooling-off periods upon initial subscription or renewal will be introduced. Consumers must also be reminded when any free or discounted trial period is ending and/or where the subscription is about to renew and make it easy for subscribers to exit their subscriptions (such as via a single communication).
Tackling fake reviews
The Bill enables the list of blacklisted practices to be updated speedily by Parliament through secondary legislation to reflect new business practices and emerging consumer harms.
While the subject of fake reviews hasn’t been included in the first draft of the Bill, it’s anticipated that these will be included. The Government has confirmed plans to consult on adding the following 'fake review' practices to the blacklist:
- Commissioning or incentivising any person to write and/or submit a fake consumer review of goods or services.
- Hosting consumer reviews without taking reasonable and proportionate steps to check that they are genuine.
- Offering or advertising to submit, commission or facilitate fake reviews.
When will the Bill come into force?
The Bill has sailed through Parliamentary scrutiny since its introduction on 25 April 2023. Its origins date back to March 2019 when the Furman Report was commissioned to consider the risks and opportunities in consumer and competition law.
With the Bill currently at the Committee stage in the House of Lords, it’s expected that Royal Assent won’t be granted before spring 2024. Enactment is likely to follow in late 2024, either in full or in part.
How should I prepare?
Businesses that may be affected by the Digital Markets, Competition and Consumers Bill should be mindful of their position, particularly if any planned company changes will bring them into SMS.
Reforms to the Bill have been widely consulted on and its passage is expected to be relatively smooth. Even so, we won’t get a full picture of the contents until final Parliamentary review.
If you want to take advice, talk to us by completing our contact form below.
