New Bill to crack down on rip-offs, protect consumer cash online and boost competition in digital markets
New powers unveiled aimed at boosting competition, clamping down on subscription traps and fake reviews
- New powers aimed at boosting competition in digital markets currently dominated by a small number of firms
- Clamping down on subscription traps that cost consumers £1.6bn a year, making it easier for consumers to opt out
- Tackling fake reviews so customers aren’t cheated by bogus ratings
New legislation will today (25 April) be introduced to ensure businesses and consumers are protected from rip-offs and can reap the full benefits of the digital economy with confidence.
Fake reviews that cheat customers, subscription traps that cost more than a billion pounds a year and new powers for the Competition and Markets Authority (CMA) to tackle businesses that breach consumer rights law are all elements of today’s far-reaching Bill.
In competitive markets, firms strive to give consumers the best products, most choice, and lowest possible prices. The Bill will provide the CMA with stronger tools to investigate competition problems and take faster, more effective action, including where companies collude to bump-up prices at the expense of UK consumers.
The CMA will be able to directly enforce consumer law rather than go through lengthy court processes. The reforms will also heighten the consequences for wrongdoers as the CMA and the courts will have the power to impose penalties of up to 10% of global turnover for breaching consumer law.
Today’s Bill will also enable the Government to ban the practice of facilitating fake reviews or advertising consumer reviews without taking reasonable steps to check they are genuine. New rules will ensure consumers can exit subscriptions in a straightforward, cost-effective, and timely way and require that businesses issue a reminder to consumers when a free trial or introductory offer is coming to an end.
This will help deliver one of the Government’s five priorities to grow the economy by increasing consumer choice and confidence in the products they buy and services they use.
Business and Trade Minister Kevin Hollinrake said:
Smartphones and online shopping have profoundly changed the landscape for businesses, consumers and the foundations of a modern thriving economy, which now lie in strong consumer choice, confidence and competition.
From abuse of power by tech giants, to fake reviews, scams and rip-offs like being caught in a subscription trap - consumers deserve better. The new laws we’re delivering today will empower the CMA to directly enforce consumer law, strengthen competition in digital markets and ensure that people across the country keep hold of their hard-earned cash.
As part of the Bill, a Digital Markets Unit (DMU) within the CMA will be given new powers to tackle the excessive dominance that a small number of tech companies have held over consumers and businesses in the UK. This market dominance has stifled innovation and growth across the economy, holding back start-ups and smaller firms from accessing markets and consumers.
The government’s new digital regime will give the DMU powers to ensure that businesses and consumers are not unfairly disadvantaged by the biggest players, allowing them access to dynamic and thriving digital markets that will ultimately support our economy to grow. If a firm is deemed to have strategic market status in key digital services, the DMU will be able to step in to set tailored rules on how they behave and operate.
For example, the biggest tech firms may be instructed by the DMU to provide more choice and transparency to their customers. If firms don’t abide by these rules, the DMU will have the power to fine them up to 10% of their global turnover.
The DMU will also be able to tackle the root causes of competition issues in digital markets by carrying out targeted interventions, opening up new paths for start-ups or smaller firms that have previously struggled to grow and compete in these markets.
Firms may be told to give customers greater flexibility when purchasing products online and to break down restrictive technical barriers that block users from using products on different devices and systems. The new regime will drive innovation across the entire economy, maintain and further the UK as an attractive tech destination for international investment, and make the digital economy a fairer place for businesses and customers.
Paul Scully, Minister for Tech and the Digital Economy said:
Today’s announcement shows we are proudly pro-growth and pro-innovation across the board in the tech sector, seeking to open up new opportunities for all firms, however small or large they are, while empowering consumers.
The Prime Minister has made his intention to secure growth and innovation within every corner of our economy very clear – the new Digital Markets Unit will help fulfil this important priority for the UK in the digital economy.
Rocio Concha, Which? Director of Policy and Advocacy, said:
This bill is a pivotal step to make markets in the UK work better for consumers, businesses and support economic growth.
Whether it’s fake reviews by dishonest businesses or people getting trapped in unwanted and costly subscriptions, our consumer protections are overdue an upgrade. Which? has long campaigned for stronger powers for the Competition and Markets Authority, including tough enforcement and the ability to fine firms that break the law directly.
The empowerment of the CMA’s Digital Markets Unit will also be a major step forward. It needs the right powers to loosen the vice-like grip of a handful of tech giants that will foster innovation and give consumers more choice and lower prices.
Dom Hallas, Executive Director at Coadec, said:
Startups thrive in competitive markets but currently too many are grappling with bed-blocking incumbents in broken markets. The Digital Markets Unit can become a powerful tool to help innovative companies break through.
UKHospitality Chief Executive Kate Nicholls said:
We’re pleased that the Government has listened to the concerns of hospitality businesses about fake reviews and have taken swift action to tackle it, by giving the CMA enhanced powers through this Bill.
Fake reviews do irreparable damage to businesses, offer consumers a misleading view of a business and devalue the efforts of honest customers leaving genuine feedback. This Bill will help to deliver fairness for both hospitality venues and their customers in this area, and we look forward to working with Government to achieve this.
Sarah Cardell, Chief Executive of the CMA, said:
The new powers in this bill help the CMA take swift, decisive action to tackle rip offs, protecting consumers whether they are shopping online or on the high street. The new fining powers will provide an important deterrent to businesses seeking to take advantage of people while also ensuring fair dealing businesses can thrive.
The bill will also strengthen the Digital Markets Unit, helping to ensure digital markets remain competitive and continue to benefit people, business, and the UK economy. We welcome its introduction to parliament and look forward to it progressing.
Background:
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New measures will come into effect as soon as possible following parliamentary approval, subject to secondary legislation and the publication of guidance.
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Today’s announcement follows the Government’s responses to the ‘reforming competition and consumer policy’ and ‘a new pro-competition regime for digital markets’ consultations published last year. The government received feedback from businesses, consumers groups, regulators and others to ensure today’s reforms provide for the strong and proportionate competition and consumer law and enforcement that consumers and businesses need to thrive.
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Consumer protection policy is devolved to Northern Ireland but reserved for Scotland and Wales. Competition policy, including digital competition, is reserved for the whole of the United Kingdom.
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Firms may be given instruction by the DMU to open up their data to rival search engines, or to increase the transparency of how their app store or marketplace review systems work. If firms don’t abide by the rules set for them, the DMU will have the power to fine them up to 10% of their global turnover and make senior managers personally responsible for ensuring their company complies with the DMU’s requests.
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Fake reviews will be tackled by taking a new power in the Bill and consulting on a new law against:
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Commissioning someone to write or submit a fake review;
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Posting consumer reviews without taking reasonable steps to check they are genuine; and
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Offering or advertising to submit, commission or facilitate fake reviews.
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‘Subscription traps’ in which businesses make it difficult to exit a contract will also be stopped. Under new rules, businesses must:
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Provide clearer information to consumers before they enter a subscription contract;
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Issue a reminder to consumers that a free trial or low-cost introductory offer is coming to an end, and a reminder before a contract auto-renews onto a new term; and
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Ensure consumers can exit a contract in a straightforward, cost-effective and timely way.
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The enforcement of consumer rights law is also being strengthened. In the three years from 2018/19 to 2020/21, the CMA’s actions provided a direct financial benefit to consumers worth £7.7 billion. Today’s announcement will build on this success.
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The CMA will be able to award compensation to consumers and directly impose financial penalties for:
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Breaching consumer protection laws, of up to 10% of global annual turnover for businesses or up to £300,000 in the case of an individual;
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Breaching undertakings given to the CMA, with penalties worth up to 5% of a business’ annual global turnover or up to £150,000 for an individual, and additional daily penalties for continued non-compliance; and
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Non-compliance with an information notice, concealing evidence or providing false information, with penalties worth up to 1% of a business’ annual global turnover or up to £30,000 for an individual, and additional daily penalties for continued non-compliance.