The U.K. Digital Markets, Competition and Consumers Act 2024 (DMCC Act), which became law on May 24, 2024, and will enter into force later in the year, introduces the most significant changes to U.K. competition and consumer protection laws in over 20 years.
Most of the public focus has been on the new controls on big tech companies that will result from the “digital markets” part of the act. There is less comment on the “competition” part, which impacts the existing general competition law and merger control regime in the U.K., and the “consumers” part. The latter is particularly important as it transforms U.K. consumer protection enforcement and, as such, impacts all consumer-facing companies active in the United Kingdom.
Under the consumer protection reforms, the U.K. Competition and Markets Authority (CMA) now has the power directly to enforce the law in the U.K. and sanction breaches. Previously, the CMA could only accept undertakings from a company under investigation or otherwise apply to court to seek an enforcement order. Both processes have proven to be slow, unwieldy and of limited practical effect.
The CMA, which had been vocal in requesting new powers to enforce consumer protection law, welcomed the DMCC Act. A CMA non-executive director said that there were “long-standing concerns [about the existing regime, including that] enforcement is long and costly and there are no material financial consequences for businesses that break the law.” The CMA’s CEO commented that the DMCC Act “will be a step-change in our ability to safeguard people’s engagement in our economy, and we are carefully considering and preparing for our first cases.”
Direct enforcement, with associated powers to gather evidence, will result in infringement decisions by the CMA. The CMA can impose fines on infringing companies of up to 10% of worldwide turnover. There are potential penalties on companies for failure to comply with investigative measures or noncompliance with CMA orders. Individuals can also face personal fines.
This administrative enforcement model for consumer protection law parallels the CMA’s existing powers under competition law, under which it regularly issues high-profile infringement decisions and imposes significant fines.
The powers will apply to existing consumer rules, brought together in the DMCC Act, including those covering unfair contract terms in consumer contracts and the 31 existing unfair commercial practices. The CMA now has direct powers to enforce against contract terms that it considers unfair because they cause a significant imbalance in the parties’ rights and obligations to the detriment of the customer. The same applies in relation to unfair commercial practices, which include a range of practices that the CMA could consider unfairly to impact consumers’ decision-making.
Building in most cases on existing decisional practice, the DMCC Act also introduces specific rules covering areas of significant public focus and concern. Fake or misleading consumer reviews, including those published without showing that they have been incentivised, now are automatically unfair.
In addition, any invitation to purchase that does not include material information is prohibited regardless of whether the practice may cause an average consumer to make a different transactional decision. That is aimed at “drip pricing,” under which suppliers such as airlines attract customers through a low initial rate but add additional costs during the purchase process, such as airport taxes and baggage.
Subscription contracts that automatically renew also are subject to specific rules. These include regular reminder notices and the ability to exit by “making a clear statement.”
New types of activities also are at risk, including hosting online reviews and advertisements. Online platforms need to consider their own activities as well as those of third parties on their platforms.
The CMA is keen to use its new powers. The CMA CEO stated in a podcast that consumer protection law enforcement under the DMCC Act will be “an incredibly important focus [of the CMA’s activity in the future]” and this will “drive real improvements in outcomes for consumers.”
Companies can expect to see direct CMA enforcement of consumer protection law in the U.K. operating in a similar way to its existing, robust action against competition law infringements across numerous industries. Consumer protection-related enforcement activity and fines in the U.K. likely will receive the same publicity and attention as competition law-related ones.
Any business active in the U.K. that is directly or indirectly consumer-facing should consider the impact of the DMCC Act and review its internal consumer protection law compliance policies, including manuals and training.