The choppy waters of consumer law are becoming increasingly difficult to navigate. When the penalty for breaching these laws is more than reputational damage alone, your business must adapt quickly to avoid drowning in serious fines. Muckle LLP explains how you can stay compliant.
From April, the Digital Market Competition and Consumers Act 2024 (DMCCA) will introduce changes to UK consumer law, including the ability for the Consumer Markets Authority (CMA) to impose fines on businesses that breach consumer law.
Key changes to consumer law under the DMCCA
1. More severe enforcement powers for the Competition and Markets Authority (CMA): under the DMCCA, the CMA will be granted the authority to impose substantial fines up to 10% of global annual turnover on businesses found to have infringed consumer law. This is massive as it introduces swifter and more impactful enforcement action. Keep reading!
2. A crackdown on misleading practices:
a. Fake reviews: businesses are prohibited from hosting or displaying consumer reviews without taking “reasonable and proportionate steps” to verify their authenticity. Additionally, the commissioning or facilitating of fake reviews is explicitly banned.
b. Drip pricing and other misleading pricing practices: the DMCCA aims to crackdown on misleading pricing practices, such as “drip pricing”, where additional charges are added to the advertised price of a product or service at a later stage during the purchasing process.
3. Regulation of subscription Contracts:
businesses will be required to provide clear information about subscription terms, facilitate easy cancellations, and send reminders before auto-renewals of product subscriptions and allow “cooling off” periods. These measures aim to prevent consumers from being trapped in unwanted subscriptions. Whilst these provisions are not expected to come into force straightaway (with their implementation being scheduled for 2026), they may require significant changes to internal processes and IT systems of businesses to ensure compliance when they come into force.
The price for non-compliance
Businesses will face severe consequences for infringing consumer law, following the introduction of the DMCCA. Not only will their reputations be on the line, but they will also face a much higher risk of a substantial financial hit from serious non-compliance.
1. Monetary fines
The DMCCA empowers the CMA to impose fines of up to 10% of a company’s global annual turnover. This is higher than in most EU countries. In certain circumstances, the DMCCA will also give the CMA power to hold parent companies accountable for breaches of consumer law by their subsidiaries.
2. Redress orders
Under the DMCCA, the CMA will also be able to impose “enhanced consumer measures”, which may require businesses to compensate consumers who have suffered harm or allow early termination of contracts.
3. Private enforcement
In addition to remedies available under the DMCCA, businesses face the risk of private claims from individuals. In addition, there has been a rise in law firms specialising in bringing class actions on behalf of consumers who have been harmed by anti-competitive behaviour or unfair trading practices. The costs of litigation and potential settlements could be substantial to businesses in such cases. Whilst the DMCCA doesn’t change the substantive law here, it is likely to encourage claimant law firms to explore more opportunities to bring claims in this area.
Why these changes matter
For businesses, it’s a reminder that staying competitive means not just innovating, but also complying with regulatory standards of fairness and accountability.
Ushering in a new era of oversight, the DMCCA poses severe reputational and financial risks to businesses that fail to move with the times.
With all business now under the microscope of the DMCCA, staying competitive means not only innovating, but also complying with new regulatory standards of fairness and accountability.
For more information on keeping your business compliant, contact David Wozniak at david.wozniak@mucklellp.com or on 0191 211 7831.