The UK competition and consumer roundup 2023

DMCC Bill provides for major changes to UK consumer protection regime

The Digital Markets, Competition and Consumer Bill, which is currently before Parliament and is expected to receive Royal Assent around spring 2024, includes a number of provisions that will make important changes to the existing consumer protection regime. 

It creates a new direct enforcement regime for the CMA, under which it will be able to enforce consumer legislation directly (as opposed to indirectly through the courts, as is currently the case) with the same powers of investigation and enforcement as it currently has for competition law.  Where the CMA concludes there has been a breach of the legislation it will be able to impose penalties of up to 10% of worldwide annual turnover of the companies involved.

The Bill also includes a number of changes to the existing consumer rights. The aim is to improve and modernise consumer rights to make sure they keep pace with market developments, in particular the trend towards online retail and online advertising. Focus here is on so-called 'subscription traps', where the new legislation will impose new duties on businesses operating subscription contracts, including providing prescribed information at the start of the contract and sending reminder notices to alert consumers that a contract is due to renew. Fake reviews are also very much on the radar and the government is considering legislation to expressly prohibit the buying and selling of fake reviews and to require businesses to take steps to ensure the reviews they display reflect genuine consumer experiences.

Under the new regime we can expect to see greater focus by the CMA on consumer protection and increased enforcement, using its new direct enforcement powers. Businesses should consider whether existing compliance policies and consumer contracts / subscription models need updating in light of the changes and whether there is a need for further training for the relevant business sections. Some of the reforms also require proactive steps to be taken by companies, such as sending reminder notices for subscription contracts, and it will be necessary to integrate these requirements into business processes.

For more details see our overview note here.

Government consults on legislation to tackle fake reviews ​

In its response to the consultation on proposed measures for reform of the UK consumer protection regime, now included in the Digital Markets, Competition and Consumers Bill, the government committed to address the issue of fake reviews. It will do so by adding fake reviews to the list of "automatically unfair practices" under the Consumer Protection from Unfair Trading Regulations now set out in Schedule 19 of the Bill, using new powers introduced under the Bill for the Secretary of State to add to this list of automatically unfair practices. As these unfair practices will be enforced by the CMA under its new direct enforcement powers, this will allow for more effective and faster enforcement action around fake review practices.

In September 2023 the government launched a consultation on its proposals to tackle the issue of fake reviews, which will add the following to the list of automatically unfair consumer practices:

• Submitting a fake review, or commissioning or incentivising any person to write and/or submit a fake review of products or traders.
• Offering or advertising to submit, commission or facilitate a fake review.
• Misrepresenting reviews, or publishing or providing access to reviews of products and/or traders without:
  • taking reasonable and proportionate steps to remove and prevent consumers from encountering fake reviews; and
  • taking reasonable and proportionate steps to prevent any other information presented on the platform that is determined or influenced by reviews from being false or in any way capable of misleading consumers

Businesses (including online platforms) that publish or provide access to reviews will have a legal responsibility to ensure consumers are not misled by the information from those reviews they present to consumers. They will therefore need to make sure they have the necessary policies and processes in place to assess the risk of fake reviews, detect suspicious reviews and remove such reviews. They should also put in place a reporting mechanism for consumers to report suspicious activity and conduct regular reviews of their processes and monitoring systems.

Government will work with the CMA to produce guidance that explains the legislation and clarifies what is expected from businesses in order to comply.

See link to the consultation here.

CMA review of Groceries unit pricing

In January 2023 the CMA launched a review of unit pricing practices in the groceries sector, both online and instore. Unit pricing is a labelling system for displaying the cost of different products by reference to standard units of weight and volume, which is regulated in Great Britain by the Price Marking Order (PMO). It requires retailers to display the unit price for most grocery products, as well as the selling price of the products, on labels in-store and online. The CMA wants to ensure that consumers are confident they have the right information in order to compare products like for like.

The CMA completed its review in July 2023 and identified several problems with unit pricing which may make it harder for shoppers to make comparisons. Some of these are the result of a failure to comply with the PMO requirements, but others are due to ambiguities in the PMO which are open to interpretation or permit unhelpful inconsistencies. The CMA is therefore making recommendations to government to reform the PMO and related legislation in order to improve unit pricing and make it easier for shoppers to make meaningful comparisons when making choices when shopping. It has also sent an open letter to all grocery retailers calling on them to make sure they comply with their obligations under the PMO.

Responding to the CMA's recommendations, the government's September 2023 consultation includes proposals for a reform of the PMO to make sure it better suits the needs of today's consumers and businesses. The proposals include: mandating the consistent use of unit pricing measures; improving legibility of pricing information through adopting consistent standards; review of whether the current small shop exemption should be revised; clarifying the requirement to provide promotional unit pricing for promotional offers such as loyalty schemes or multibuys and views on how the Deposit Return Scheme should be displayed on pricing labels.

Hidden fees and drip pricing under review

The government's September 2023 consultation also explores the use of drip pricing and hidden fees, seeking views on whether and how the government should approach the issue. Drip pricing, where consumers are shown an initial price for a product and additional fees are subsequently added when they proceed with a purchase or transaction, undermines price transparency and makes it difficult for consumers to make informed decisions based on price.

Under existing consumer protection legislation businesses are already required to provide consumers with sufficient information in order to allow them to make informed purchasing decisions, including information around price and additional charges. When adopted, the Digital Markets, Competition and Consumers Bill will add 'the omission of material information from an invitation to purchase' as a separate unfair commercial practice. 

The government is considering whether further intervention, specifically focused on drip pricing, is necessary to protect consumers. This may be the case in particular for dripped fees that are mandatory charges, which consumers will have to pay in any case but which are not included in the base price. 

In its response to the consultation the CMA argues that there should be a specific banned practice on the drip pricing of all mandatory elements of the price, as well as for those optional charges for which it is reasonably foreseeable that most consumers would pay.

New fuel pricing monitoring powers for the CMA

The CMA's road fuel market study, published in July 2023, concluded that competition in the retail market for the supply of petrol and diesel is not working well, and that greater transparency in pricing is needed to improve consumer confidence and bring down prices for drivers. To address these concerns, the CMA recommended that the government should create:

• A new statutory fuel-finder scheme to give drivers access to live, station-by-station fuel prices, which should help them to find the cheapest fuel and drive down prices.  The scheme would require fuel retailers to provide up-to-date pricing data and make it available to drivers in an open and accessible format that can easily be used by third party apps, or through a dedicated fuel finder app.
• A new statutory monitoring body to hold the industry to account, with formal powers to monitor prices and recommend further action if competition continues to weaken in the market.

Pending adoption of the relevant legislation to implement the CMA's recommendations, the government asked the CMA to act on a temporary basis, using its existing powers. In August 2023 the CMA launched a temporary fuel prices data scheme, encouraging fuel retailers to share accurate and up-to-date road fuel prices that will be available to third-party developers. The CMA website lists the retailers who have signed up to the voluntary scheme, with links to their pricing data.

In an update to the DMCC Bill (through a government amendment added at the House of Commons report stage) the statutory provisions for a new fuel finder scheme and powers for the CMA, which will become the new fuel monitor body, have now been included in the Bill. They provide the CMA with information-gathering powers that will allow it to operate that function effectively. The powers are similar to those the CMA can use during a market study or market investigation but are specific to the road fuel sector.

The legislation will allow the CMA to ask a business involved in the distribution, supply or retail of petrol and diesel for information in order to assess competition in the market and the impact on consumers. The new powers are supported by enforcement provisions, including for the CMA to impose civil penalties for non-compliance. The powers will be time-limited and will require a review by the Secretary of State after five years, to consider whether the powers should be extended by regulation.

Focus on greenwashing in the consumer sector continues

Greenwashing, where businesses make unsubstantiated, inaccurate or false environmental claims to consumers, is very much on the radar of the UK and EU consumer protection enforcers.  Guidance and (draft) EU legislation is aimed at ensuring that consumers are protected from incorrect or misleading information and that businesses who are greenwashing do not gain an unfair advantage over those doing the right thing.  The aim is also to ensure that businesses who are focused on sustainability have the necessary information to make those claims without having to worry about the risk of greenwashing. Given the number of environmental risk areas within the consumer sector – be that agriculture, garment manufacturing, global shipping or the energy that businesses in the sector require, the consumer sector is an area where greenwashing risks are definitely present.

In the UK, the CMA's Green Claims Code sets out six principles which reflect the requirements of existing consumer protection law in the context of environmental claims. Businesses are required to ensure their claims are truthful and accurate; are clear and unambiguous; do not omit or hide important information; compare goods or services in a fair and meaningful way; consider he full life cycle of the product or service and are substantiated. The Code expands on what those principles mean and contains a number of worked examples in order to illustrate how these principles would operate in practice.

The CMA's first investigation since publication of the Code in September 2021 is targeted at several fashion brands and the green claims they are making in marketing their products to consumers. In January 2023 the CMA expanded its scrutiny of misleading green claims to the fast-moving consumer goods sector. According to the CMA, problematic claims include the use of vague and broad eco-statements, eg, packaging or marketing a product as “sustainable” or “better” for the environment with no evidence; misleading claims about the use of recycled or natural materials in a product and how recyclable it is; or entire ranges being incorrectly branded as “sustainable”. As a result of that investigation the CMA has now launched a more targeted investigation into green claims made by Unilever for some of its household products. The CMA is concerned that Unilever may be exaggerating the green credentials for these products by using vague and broad claims, unclear statements and the use of misleading images. For more details on that investigation see our blog post here.

The CMA is also investigating the green heating sector where it is focusing on marketing practices around hydrogen-blend or hydrogen-ready boilers and the extent to which these give the impression that these products are more environmentally friendly than they are. On 13 December 2023 the CMA published a consultation on its draft consumer law compliance advice for businesses that are marketing green heating and insulation products to consumers.  The draft compliance advice is based on the issues identified by the CMA in its May 2023 report on consumer protection in the green heating and insulation sector, which focus on upfront pricing information and claims about product benefits (for more details see our briefing here). It has indicated that it intends to continue its wider scrutiny of misleading green claims in relation to other sectors, such as potentially the transport and travel sectors. The CMA's focus on greenwashing and misleading green claims was set out in its 2023/2024 Annual Plan and broadening its green claims work is also listed as a key priority in its draft 2024/2025 Annual Plan.

At EU level the EU Commission published a proposal for a Directive on substantiation of explicit environmental claims (Green Claims Directive). The proposal is part of the European Green Deal which contains a commitment to tackle false environmental claims, by making sure that consumers receive reliable, comparable and verifiable information to allow them to make more sustainable decisions and to reduce the risk of greenwashing. The Directive will require Member States to adopt national legislation which ensures that businesses that make a voluntary, explicit environmental claims are able to substantiate and present such claims accurately to consumers.

The Directive will complement and amend the EU Unfair Commercial Practices Directive and the Consumer Rights Directive. It will expand misleading and unfair commercial practices to include environmental claims such as claims which are generic and unsubstantiated; which relate to future environmental performance not supported by clear, objective and verifiable targets and independent monitoring; which present environmental features already required under existing legislation as distinctive.  Once adopted, the Green Claims Directive will be enforced by the relevant authorities of the Member States who will need to have the power to request information, impose effective remedies in order to end the infringement and to impose interim measures and penalties for breach (currently set in the draft Directive at a maximum level of 4% of annual turnover in the relevant Member State). The Directive could also give rise to collective redress under the EU's Collective Redress Directive.

For more details see our recent greenwashing podcast and our blogpost on greenwashing disputes risks.

Regulatory scrutiny of harmful designs in digital markets – Focus on online choice architecture

In August 2023, the UK Information Commissioner's Office and the CMA published a joint paper on so-called "online choice architecture" (OCA), which considers the ways in which businesses present information and choices to users online, with a specific focus on the impact this has on the provision of personal information. While the joint paper helpfully acknowledges that OCA can be beneficial to consumers and to competition, it notes the main pitfalls for businesses to avoid in the design and deployment of OCA, with a particular emphasis on choice, information and testing OCA designs. It also suggests best practices which should be followed when designing and implementing online user interfaces.

For a detailed overview of the joint report see our briefing here.

UK and EU competition regulators publish guidance for competitors who co-operate on sustainability agreements

In October 2023 the CMA published the final version of its Green Agreements Guidance, setting out the circumstances under which collaboration between competitors aimed at protecting or enhancing sustainability may be compatible with competition law. The aim of the guidance is to ensure that businesses are not unnecessarily deterred from co-operating to achieve sustainability objectives that benefit consumers. This follows publication by the EU Commission in June 2023 of its sustainability guidance, as part of its horizontal co-operation guidelines.

On the whole the assessment of sustainability agreements under the EU and the CMA Guidance is pretty much aligned, but there are differences. The definition of sustainability agreements in the CMA Guidance is narrower and unlike the EU definition it does not include wider societal objectives such as improving working conditions. An important difference in approach between the two sets of guidance is around climate change agreements. Here the CMA is taking a more permissive approach to the application of the ‘fair share of benefits to consumers’ condition when assessing whether an agreement may benefit from an exemption. It proposes to consider the benefit of the agreement to all UK consumers when offsetting the harm to competition, instead of limiting it to only consumers of the products or services that are subject of the agreement, based on the exceptional nature of the harm caused by climate change.

To further support businesses in this area, the CMA will operate an open-door policy giving businesses the opportunity to seek informal guidance on their proposed initiatives. Fines will not be imposed for agreements discussed with the CMA, providing the CMA does not raise any competition concerns or such concerns are adequately addressed. The EU Commission is also encouraging parties to sustainability agreements to approach it for informal guidance under its Informal Guidance Notice, where their agreement gives rise to novel or unresolved issues, but the Commission’s Guidelines do not refer to a similar immunity from fines.

For more details see our briefing on the CMA's Green Agreements Guidance here and our detailed overview of the EU Commission's Guidance here.