Digital Markets, Competition and Consumers Act 2024 - Consumer law changes and enhanced rights

Consumer law is changing. Following the overhaul that was the Consumer Rights Act 2015 (and the earlier Consumer Protection from Unfair Trading Regulations 2008 (CPUT)), the consumer landscape has changed sufficiently to require new protections against aggressive business practices – especially in the online space. To that end, the Digital Markets, Competition and Consumers Act 2024 (DMCC) has now received a Royal Assent and the Competition and Markets Authority (CMA) is currently consulting on its draft guidance. The DMCC enhances the CMA’s authority in enforcing consumer laws, establishes a new regulatory framework for digital markets in the UK and is expected to impact businesses across various sectors. 

This blog one of three exploring the other changes the DMCC makes to the wider regulatory and competition law landscape. Read on to find out what you need to know about new consumer law changes, and how you can make your business compliant. 

In summary, what are the key changes that DMCC introduces for consumers?

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1. protections from unfair commercial practices;

2. changes to consumer rights in relation to subscription contracts; and 

3. new enforcement powers against businesses. 

Protection from unfair commercial practices

Updated definition of ‘commercial practices’

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Under CPUT, a commercial practice is: ‘any act, omission, course of conduct, representation or commercial communication (including advertising and marketing) by a trader, which is directly connected with the promotion, sale or supply of a product to or from consumers’. 

The emphasis here is on the direct relationship between the trader and the consumer (or group of consumers). From a consumer perspective, consumers had protection from ‘unfair’ ‘commercial practices’ in a general sense under the CPUT. These are things like aggressive selling practices (doorstepping), lying (by act or omission), hiding fees and so on. 

The DMCC has shifted this definition, to recognise the interrelationship between different traders and different consumers who are active in one marketplace – e.g an online setting where consumers are influenced by other consumers and other traders. A commercial practice, under the s. 148 DMCC, is now:

‘(2)…any act or omission by a trader relating to the promotion or supply of:
(a) The trader’s product to a consumer. 
(B) Another trader’s product to a consumer. 
(c) A consumer’s product to the trader or another person’.

This widens the range of what are considered ‘unfair’ commercial practices. Whilst this is partially rewording of existing principles, there is an indication here that unfair practices do not just emanate between the trader and the consumer. The inclusion of ‘fake reviews’ now being an automatically unfair commercial practice goes to this change (more on this below). 

How did the definition of ‘unfair commercial practices’ change? 

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Under CPUT, ‘a commercial practice is unfair if: 

• ‘it contravenes the requirements of professional diligence; and
• ‘it materially distorts or is likely to materially distort the economic behaviour of the average consumer with regard to the product; or 
• ‘it is misleading; or
• ‘it is aggressive; or
• ‘it is automatically unfair.’

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Under s.225(4) DMCC, a commercial practice is now unfair if:

These are not just welcome clarity changes. The wider DMCC has made important tweaks that widen (and have the potential to wider further) consumer rights. 

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Changes to ‘material’ information and drip pricing

S. 230 DMCC sets out requirements for what is or is not material information that is to be included in an invitation to purchase. 

The main, and most important, change is around ‘drip’ pricing. Drip pricing is where a trader indicates one price for a good or service at one stage of the consumer journey, and a higher price later on (usually at checkout). The typical example is a so-called booking fee. 

Drip pricing is now mostly prohibited under the DMCC. The headline price (the first price that the consumer sees) must now include: 

• any mandatory fees – fees that the trader will or must impose on the consumer (VAT, booking fees, other taxes); and
• any variable mandatory fees – fees that the trader will or must impose on the consumer, but which cannot be calculated in advance (e.g. delivery costs). The trader is not obliged to include a precise figure, but they are required to indicate what fees will be included, and how they will be calculated. This information has to be equally prominent with the headline price.

What traders are not obliged to include in a headline price are optional fees (fees that the consumer can opt-into paying). These are things like upgrades, printed tickets, enhanced delivery, speedy boarding, and so on. The current Government indicated that it intends to consider further regulation of optional fees. It remains to be seen if the next Government adopts the same approach. 

Since omitting material information from an invitation to purchase is now de facto unfair, traders must pay closer attention to their advertisements and purchase systems to ensure all the necessary information is included. For instance, the identity of the trader, their address, withdrawal rights (if any) and any other information a trader is required to give by law. 

Fake reviews and additional automatically unfair practices

Both the CPUT and now the DMCC deem certain commercial practices unfair in all circumstances.

These are activities that most people would regard as prohibited – bait and switch activities, lying about availability, saying that a business is endorsed by a trade body when it isn’t and so on. A full list is in Schedule 20 of the DMCC (here).  

The DMCC now adds fake consumer reviews to this list of de facto unfair business practices. 

This new commercial practice has three limbs:

• the trader cannot post or tell/incentivise others to post fake reviews (or hide or tell someone to hide the fact that they were incentivised to make a genuine review);
• no one can offer to arrange for make reviews; and
• review websites/aggregators need to properly represent reviews (e.g. in summaries) and they need to take reasonable and proportionate steps to remove and prevent fake reviews. 

A consumer review is a review of a product, trader or other matter relevant to a transaction decision. A fake consumer review is one that purports to be, but is not, based on a person’s genuine experience. 

This is, of course, welcome for both businesses and consumers alike. It remains to be seen, however, how the CMA will enforce this prohibition in practice. For example, ‘review bombing’ (by both actual consumers and otherwise) is both a loved and loathed consumer practice. It remains one of the only ways to bring about consumer pressure to demand change – rightly or wrongly. Further guidance on these issues in the future would undoubtedly be welcome. 

Separately, the DMCC also provides for the Government to add to the list of automatically unfair practices from time to time to keep pace with technology and commercial practices. This will likely reduce the time necessary to prohibit new unfair practices and protect consumers. It is to be noted that fake reviews were identified as a major consumer issue in the early 2000s. 

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Under the DMCC, subscription contracts are contracts for the supply of goods, services and/or digital content which auto-renew unless the consumer terminates and/or those that contain a free/reduced trial after which the consumer will be required to make payments or payments at a higher rate. 

This requirement of termination is the key difference. It is conceivable that merely long term contracts which cannot be terminated until they expire (even when they are paid monthly) are not subscription contracts. However, such long term contracts are more likely to be unfair generally. There are also other excluded contracts like energy bills, food delivery, ATOL package holidays (to name just a few exclusions). 

In short – traders that offer subscription contracts (streaming accounts, beauty boxes, or video game accounts) will need to ensure that their products and their contracts comply with the following new rules and duties:

1. Pre-contract information

Traders now must offer, in addition to the existing rules about pre-contractual/sale documentation (contained in the Consumer Contracts (Information, Cancellation and Additional Charges) Regulation’s 2013), clear information about the consumer’s subscription. 

Put very shortly: traders need to be extremely specific, prior to the consumer’s purchase or commitment to a subscription, about what the consumer’s obligations are. Traders cannot just rely on a general understanding of what a ‘subscription’ might or might not be.

For example, traders will need to specify a minimum period that must elapse before the consumer can cancel (where their cooling off rights have expired – see below) or any dates on which the consumer will have to pay for their subscription (and how much). This key type of information must be provided separately and prior to purchase. 

Different requirements also apply to different modes of sale – online, in person, over the phone etc. 

2. Reminder notices

A novel requirement is an obligation on the trader to send out reminder notices to subscribers. 

These are prominent notices (by email/letter) given at specified intervals reminding a subscriber of an obligation to pay. This way giving them an opportunity to avoid a renewal/cancel the agreement. 

The notices must be given sufficiently in advance to cancel any renewal or continuation of the subscription.

The frequency of such notices is as follows:

• for a subscription under a free trial/reduced fee, once at a time prior to the date that the consumer will have to pay the full amount for their subscription;
• where renewal payments are due every six months or less,  reminders need not be given more frequently than every six months. In other words, if a consumer had a weekly subscription, one reminder would need to be sent within a 6 month period reminding the consumer that it can cancel its next weekly payment and the contract thereafter; and
• where renewal payments are due less frequently than six months (usually annually), in respect of every renewal payments. 

Whilst reminder notices are a new burden, it is to be noted that the DMCC limits the business’ obligations by stating that notices and other communications are deemed received on the day that they are sent. This applies even if the consumer doesn’t receive such notices and the business isn’t at fault for that failure. 

3. Multiple cooling off periods

That consumers are protected by a minimum of a 14 day cooling off period in respect of any ongoing contract is well known. 

The DMCC introduces double (or triple!) 14 day cooling off periods for subscription contracts. These are as follows:

• an initial cooling off period of 14 days after the day on which the consumer first receives a delivery of goods or the day the contract for services/digital goods is made;
• a free trial cooling off period of 14 days after the end of a free trial or discounted period. In other words, the consumer can cancel their free trial within 14 days after it starts and again for 14 days after they have made their first payment; and/or
• a renewal cooling off period of 14 days after any renewal that commits the consumer to a further period of 12 months or more. 

This information, alongside all other cancellation rights a consumer may have, needs to be given as part of the pre-contract information. Not disclosing such information is now considered a criminal offence.

4. Cancellation/termination rights 

Consumers must now be able to cancel a subscription in a straightforward way. 

For example, if a subscription was entered into online, the cancellation method must be made online and be easy to find. Consumers must also be able to cancel otherwise than by using the business’ proscribed method (e.g. by email). 

Once a contract has been cancelled/terminated, a business must:

• give the consumer an ‘end of contract’ notice; and
• refund any overpayments. 

What the refund might look like has been left for the Government to implement independently via secondary legislation. It remains to be seen if there will be any curbs to the standard practice of allowing consumers to cancel without providing refunds, on the basis that the service will be available to them until the end of the subscription term. 

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Previously, the CMA also had to go to court to enforce its powers. It no longer must do so. The idea is that direct enforcement will make it easier to convict businesses that breach consumer rights.

What are the new fines under DMCC?

• engaging in commercial practices breaching consumer protection laws: up to £300,000 or 10% of turnover (if greater);
• breaching a court undertaking or undertaking given to an enforcer: up to £150,000 or 5% of turnover (if greater);
• breaching an enforcement order given by the court or other enforcement notice given by an enforcer: up to £150,000 or 5% of turnover (if greater);
• non-compliance with an information notice given by an enforcer: up to £30,000 or 1% of turnover (if greater) – plus a daily penalty of £15,000 or 5% of turnover (if greater); and
• providing materially false or misleading information to the CMA: up to £30,000 or 1% of turnover (if greater).

Apart from these fines, enforcers and the CMA may also set out improvement notices, conduct investigations, or make takedown requests (to remove online content).

When does the DMCC come into effect?

While the DMCC is now law, the consumer law provisions rely heavily on secondary legislation. Depending on the priorities of the new government, the majority of reforms is expected to come into force in late 2024 with certain provisions coming into force no earlier than spring 2026 (for example, for subscription contracts). 

Conclusion

The DMCC represents a shift towards increased consumer protections. These are both immediate changes (once the Act comes into force) and ones that set the ground for future rules that businesses must comply with. If you sell to consumers, you must take action now and don’t wait until the DMCC comes into force to ensure that your practices and contracts are compliant with the DMCC.

At EM Law, we are experts in consumer law requirements and consumer contracts. Please do not hesitate to contact Neil Williamson or Colin Lambertus – and we would be happy discuss your questions. 

Further Reading