DMCCA consultations launched on implementation of UK consumer protection

The Digital Markets, Competition and Consumers Act 2024 (DMCCA), which brings significant reform to both UK competition and consumer law, became law in May 2024. The first commencement regulations that relate to competition and digital markets provisions have now been made and the regulator, the Competition and Markets Authority (CMA), has consulted on accompanying guidance. These parts of the DMCCA will come into force on 1 January 2025.

Meanwhile, to bring the consumer aspects of the legislation into effect, the government is consulting on implementation of the DMCCA's new regime for paid subscription contracts, which includes proposals for additional requirements for refunds of digital content subscriptions when cancelled during "cooling-off" periods.

The CMA is also consulting on draft guidance on the unfair commercial practices (UCPs) provisions in the DMCCA, including the new prohibitions relating to drip pricing and fake reviews and on guidance on its enforcement regime.

New paid subscription contracts regime

This consultation on the implementation of the new subscription contracts regime from the Department for Business and Trade seeks views on the government's proposed regulatory policies to inform the content of secondary legislation that will implement the new regime.

The consultation closes on 10 February 2025 and includes proposals for cooling-off cancellation rights and returns and refunds, exiting a subscription contract, information notices and pre-contract information.

Cooling-off cancellation rights: returns and refunds

The DMCCA gives consumers an initial 14-day cooling-off period for when they first enter into a subscription contract and a renewal cooling-off period for certain subscriptions. The guidance clarifies how the refund process will work in practice for goods, services, digital content and mixed contracts.

The government is consulting on three options for how the refund rules could work when a consumer cancels a digital content subscription having already consumed content during the cooling-off period:

• Option 1: pro-rata refunds for both initial and renewal cooling-off periods. The consumer will be provided with a refund which will be reduced pro-rata for the content supplied (which in practice will mirror the current regime for services).
• Option 2: waiver for first cooling-off period and pro rata-refund for subsequent cooling-off periods. On entering the contract, the consumer expressly waives their cooling-off rights in relation to the initial cooling-off period and, for cancellation during a renewal cooling-off period, they receive a proportionate refund.
• Option 3: waivers for all cooling-off periods. The consumer expressly waives both their initial and renewal cooling-off rights when they enter into the contract (although the government does not favour this option).  
   

The government also asks whether guidance is sufficient for how mixed contracts will work or whether regulations are needed and for views on proposed regulations for extending cooling-off periods where the trader fails to inform consumers of their cooling-off rights. In addition, it asks for evidence of the extent to which consumers currently cancel their contracts within 14 days.

Exiting a subscription contract

The DMCCA requires traders to ensure that consumers can exit a contract easily. Traders are not prohibited from seeking feedback from customers during the exit, provided exit is still straightforward for consumers to do and the feedback process does not frustrate or elongate the process. The government proposes to clarify the exit requirements through guidance covering various online methods of exit, the time it takes to exercise the right and how traders should engage with consumers to obtain feedback.

Information notices

The DMCCA sets out requirements for reminder, end of contract and renewal cooling-off notices that traders are required to send consumers. The government is proposing to introduce additional requirements for all these notices, including, for example, a requirement that the primary purpose of the communication is immediately apparent to the consumer and that the prescribed information that a trader must provide is the first information the consumer sees in the notice.

Pre-contract information 

The DMCCA requires traders to provide key information clearly and prominently before the consumer enters a subscription contract so that the most important details are pulled out and clear. Traders must also provide full information, comprising the key information plus additional information, such as full details of a consumer's cooling-off rights. The government will provide further clarity in guidance, explaining for example that key pre-contract information in online contracts must be visible in the location where the consumer will enter into the contract and be directly accessible, and that all pre-contract information is easy to understand and not obscured by other information.

UCPs guidance

The DMCCA will revoke and restate the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). The provisions on UCPs in Chapter 1 of Part 4 of the DMCCA are expected to come into force in April 2025.

Under the DMCCA, some UCPs, such as misleading and aggressive practices, are prohibited only if they are likely to cause the average consumer to take a different transactional decision. However, other UCPs , such as "drip pricing" and commissioning or publishing fake reviews, are prohibited regardless of their impact on the average consumer's transactional decisions.

The CMA's guidance explains key concepts, such as "average consumer" and "transactional decision", and sets out how the UCPs provisions may apply in practice, with flowcharts and examples of situations that might amount to a breach. The CMA is consulting on the draft until 22 January 2025.

The CMA can make use of both civil or criminal enforcement powers when investigating unfair commercial practices.

Fake reviews

Fake and misleading consumer reviews and consumer review information (that is, information derived from or influenced by a fake or misleading consumer review) are included in the DMCCA list (Schedule 20) of commercial practices that are prohibited in all circumstances.

The guidance explains that the concept of a consumer review is broad and that reviews can take different forms, including text, speech and graphic representations, for example, a star rating. Fake reviews can be positive or negative, and misleading reviews include reviews that conceal the fact that they have been incentivised. Traders are not banned from paying or incentivising third parties to review products or services, but any incentivised review must be labelled prominently as incentivised.

Consumer review information usually concerns the quality, value, performance or reputation of products and services or traders, enabling consumers to make comparisons quickly. It includes aggregated information in the form of overall ratings, review counts and rankings. The ban applies to consumer review information that is published in a misleading way or is false or misleading – for example, the review information is derived from fake reviews or has been influenced by incentivised reviews that have not been separated from other reviews.

Essentially, all traders are prohibited from submitting or commissioning fake or misleading reviews and consumer review information.

Hosting banned reviews

Anyone who publishes or provides access to banned reviews must take whatever reasonable and proportionate steps are necessary to prevent and remove these reviews. Failure to take these steps amounts to an infringement. This covers retailer websites, specialist review sites, online marketplaces, search services, social media and trader recommendation platforms.

The guidance does not define "reasonable and proportionate", as the government recognises that there is unlikely to be a "one size fits all" approach. The steps needed will depend on the circumstances and will vary based on the level of risk of consumers encountering banned reviews, which traders must seek to understand through a risk assessment.

The government does set out some "considerations " that will help determine what is reasonable and proportionate, such as the amount of control that users have over the website's review functionality and the level of consumer review activity on the website, but stresses that it will be judged on a case-by-case basis. Even small platforms must implement effective measures if their content poses a risk and if they cannot do so, the guidance provides that they should not publish any consumer reviews.

All publishers must:

• Publish a policy banning fake reviews and setting out the publisher's approach to incentivised reviews and consumer review information.
• Regularly assess the risk of consumers encountering banned reviews and consumer review information and identify appropriate measures to address them effectively. At a minimum, these should include detection, investigation and the actions that will be taken in response to such reviews appearing, including sanctions (for example, removing reviews for traders who have submitted or benefitted from banned reviews, suspending user accounts and putting warnings on the pages of traders found to have benefitted from banned reviews-related activities).
• Regularly evaluate the effectiveness of these processes.

'Drip pricing'

"Drip pricing" is the practice of showing consumers an initial headline price for a product and then adding further mandatory charges during the purchasing process. This practice is banned under the UCPs provisions as an omission of material information from an invitation to purchase.

Instead, traders must indicate the total price of the product in an invitation to purchase, including all mandatory fees, taxes and charges (such as booking fees), delivery charges (where delivery is the only option) and initial sign-up charges. The guidance explains that a charge will be mandatory if it is unavoidable; for example, broadband installation fees. The "total price" requirement means that where a monthly membership charge is made; for example, the trader will still have to state the total price that will be charged over the whole of the contract term.

The guidance also explains that genuinely optional services that a trader wants to offer in addition to the product being sold do not need to be included in the headline price and can be set out separately, unless avoiding them is not viable in practice – for example, a business has a limited number of physical stores from where consumers can collect their purchase, meaning that delivery is the only practical option. If the consumer has an alternative, viable option of collection or an option to pay extra for next day or nominated date delivery, the delivery charges can be set out separately.

The guidance also explains that if, because of the type of product, the total price cannot reasonably be calculated in advance, information on how the price will be calculated must be provided as prominently as the headline price and such that the consumer can work out the total price. This could apply to products sold by weight, length, time or distance. The guidance stresses that if there are limitations in the way the information is provided – for example, not enough space on the label – businesses should take steps to overcome these. Where it is genuinely not practicable to provide all relevant information within the invitation to purchase, the total price must be provided in as close proximity as possible, with as few additional actions from the consumer as possible; for example, being no more than one click away.

Omission of material information from an invitation to purchase

Where traders make invitations to purchase, they will need to ensure that they include the material information required by the UCPs provisions or that the information is apparent from the context.

An invitation to purchase is "a commercial practice involving the provision of information to a consumer: (a) which indicates the characteristics of a product and its price, and (b) which enables, or purports to enable, the consumer to decide whether to purchase the product or take another transactional decision in relation to the product".

The idea behind this concept is that the consumer should be given the key information they need to make an informed transactional decision. An invitation to purchase can exist even where the information indicating the price and characteristics of a product is minimal. This includes, for example, where the lowest price for which the advertised product can be bought is indicated or where a single visual reference is used to describe a product that is available in a variety of forms.

Changes to advertising codes

Since most of the rules on misleading advertising in the advertising codes derive from or are compatible with the CPRs, the Committee of Advertising Practice and the Broadcast Committee of Advertising Practice have amended them to align with the DMCCA.

For example, advertising rules that reflect prohibited practices that are unfair in all circumstances, such as drip pricing, now state that marketing communications "must not" engage in the practice, rather than referring to misleading the consumer, and that for marketing communications that quote prices for advertised products, omitting material information includes omitting the total price of the product..

The changes are open for consultation until 5 February 2025.

Enforcement powers

The DMCCA substantially expands the powers the CMA is able to wield, and introduces direct civil powers and civil court-based enforcement options, alongside existing (but bolstered) criminal and investigatory powers. Under the DMCCA, the CMA is now able to determine whether a breach of consumer law has occurred without intervention from the courts, and can directly impose percentage of turnover-based fines.

The CMA's investigatory powers have also been significantly enhanced, with a central new "duty of expedition" requiring it to make decisions and take action "as soon as reasonably practicable." This new requirement will change the way the CMA conducts investigations, increasing the pressure on businesses under investigation to quickly gather information and respond to questions. This new duty, along with the CMA's strengthened enforcement powers, is expected to increase the pace of consumer protection investigations.

The CMA's draft guidance on its consumer protection role and powers explains the approach the regulator proposes to take to using both its civil and criminal enforcement powers and how it will work with partners. The CMA is consulting on the draft guidance until 22 January 2025

Osborne Clarke comment

With the UCPs provisions due to come into effect in spring 2025, businesses, whether they deal with consumers directly or indirectly, need to start bringing their practices into compliance now. This is particularly so for those businesses that host consumer reviews, as risk assessments need to be undertaken and policies on dealing with banned reviews need to be written. Businesses have more time to prepare for the new subscription contracts provisions, which are not expected to come into effect until spring 2026 at the earliest.

With the increased consumer enforcement powers given to the CMA, the risk landscape for businesses will inherently increase. Companies must ensure they are aware of their obligations under the UK's evolving consumer protection laws to avoid the potential for significant civil penalties or even criminal prosecution. This heightened regulatory scrutiny means businesses need to be more vigilant in their practices and transparent in their dealings with consumers. 

Anna Matsiienko, a paralegal with Osborne Clarke, assisted with this Insight.