Blog on a new Consumer Compliance Bill recently presented in the UK Parliament.
Yesterday, following an article published by Law-Now, the UK Government released “highly-anticipated proposals” in relation to new consumer laws that may have implications in this country at some point.
The Digital Markets, Competition and Consumer Bill (“the Bill”), “propels the UK’s consumer regulator, the Competition and Markets Authority (“CMA”), from having no right to fine for consumer law breaches into having the most aggressive fining regime in any country we know, with penalty fines linked to a business’ annual global, rather than UK-specific, turnover.”
The article states there are over 100 pages of new consumer protection legislation that covers “enforcement (including direct enforcement powers for the CMA), protections from unfair trading, subscription contracts, consumer savings schemes, and alternative dispute resolution for consumer contract disputes.” Whilst some of these are already able to be dealt with by the ACCC and ASIC in this country, the new provisions allow the CMA to go much further. So, is this a move that we’ll see something similar here in the not too distant future?
Bill proposals
The proposed Bill allows, for example:
- Enforcement – 10% fines based on global turnover for “infringements of certain consumer protection laws” plus the ability apply penalty fines for “failure to comply with information notices, for breaches of any undertakings given by an enforcement subject, or for a breach of any direction imposed by the CMA.”
- Enforcement – compensation direct to consumers. “The CMA will be able to direct businesses to take enhanced consumer measures as the CMA considers is just and reasonable (without having to go to Court), which could include businesses having to compensate consumers directly.”
- Subscriptions. This is an area the ACCC is already well-aware of. It’s mentioned in its September 2022 Digital platform services inquiry interim report. The UK Bill, though, seeks to go much further:
- Replace Existing Requirements. Current Regulations applying to subscription contracts to be revoked.
- New information requirements. New contracts will need to provide clearer information, with lots of new information and specific requirements as to how and when it’s supplied. “Some of the information must be given as part of the sign-up process rather than simply being made available (for example, using links). One particular requirement worth mentioning is that businesses will be required, as part of the final step which the consumer takes to enter into a subscription contract, to ensure that the consumer expressly acknowledge that the contract imposes an obligation on the consumer to make payments.”
- Reminder notices. Businesses will need to “send reminders to consumers in certain situations, including before the first renewal payment and in respect of certain subsequent renewal payments. Reminders must include certain information sent at specific times.
- Cancellation requirements. New changes will be required to make it easier for consumers to cancel the contract.
- Implied terms.”A trader’s compliance with certain duties (for example, to provide the required information about the subscription) to be an implied term in every subscription contract. Breach of those implied terms will entitle the consumer to cancel, and may entitle the consumer to a refund.”
- Cooling-Off periods . The Bill requires businesses to give consumers an initial cooling-off period but also, when a honeymoon period ends and when the subscription is renewed every 12 months.
- Future changes. The Bill proposes to allow the UK Secretary of State to by-pass the usual Parliamentary requirements and amend the requirements of the Bill in relation to subscription contracts.
Further intervention abilities
Additionally, the Bill also encompasses the ability of the CMA to intervene in:
- Unfair contract practices. The current “Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”) are to be revoked” and replaced with vastly improved (read ‘onerous’) requirements for businesses, possibly so as not to be affected by “The Retained EU Law (Revocation and Reform) Bill 2022 which may otherwise have led to the sunsetting of the CPRs”; and
- New unfair commercial practices. The Bill “proposes to create an open door opportunity for the UK Government to amend an existing list of automatically unfair practices” and “change which commercial practices are in all circumstances considered unfair more readily.” This includes a number of practices in regard to fake reviews. With what’s proposed, I’d suggest some businesses will likely consider removing their review ability altogether because the cost of compliance may be inordinate.
- Consumer pre-payment / saving scheme protections. The Bill includes a number of measures aimed at “safeguarding consumers’ money through insurance or trust arrangements” for those entities running the likes of Christmas savings clubs. In Australia, it would also include the likes of pre-paid funeral schemes.
The cost of implementing these compliance measures may require very significant system amendments. It’s unlikely these costs will not be passed onto consumers. With UK inflation much higher than Australia, inevitably, this will lead to higher prices for UK consumers.
Will we see something similar here?
The ACCC and ASIC are aware and dealing with much of this already here in Australia. The new provisions in the UK, though, allow the CMA to go much further. These measures are likely to involve significant expense for businesses operating in and into the UK. The question is not if, but when, will our regulators seek similar abilities?
A paragraph from the article is worth quoting in full. It states “[t]he new regime could lead to quicker enforcement action, with the impact of fines at the maximum level being potentially devastating for infringing businesses. To-date, the CMA’s line has always been that it remains for a court to decide whether or not consumer law has been breached. With the new proposed powers, court determination may well become irrelevant for many businesses as the threat of fines, and/or compensation schemes, may leave little option but to toe the line. It remains to be seen whether these powers will actually be sufficient on their own to deter non-compliance and bolster consumer protection, at least in the short-term, given that the CMA does not have endless resources to take enforcement action.” The same applies to both ACCC and ASIC.
Given the experience financial institutions have here with AFCA (and this equally applies to other industries with EDR requirements), “toeing the line” may as well read capitulation. These measures are aimed squarely at ensuring consumer protection. There is no doubt many of the measures will be warranted. Unfortunately, they are probably going to undermine business confidence and in the event of a dispute, increase ‘perceived injustice’. Bureaucrats may not be impartial and appealing to a Court may be an excluded possibility under the Bill. Allowing regulators to impose cheap consumer justice using IDR principles in a kangaroo court isn’t a good fit for long-term prosperity.
What I will look forward to seeing is how the House of Lords will react to giving the CMA the ability to impose fines. There will be a number of amendments sought but the ability for a regulator to impose fines in itself seems to be new under English law. On face value, it appears to interfere with the separation of powers under the Westminster system of government. The judiciary are the ones that interpret the law and how it is to be applied. The Westminster system relies on Parliamentary oversight. Any fines (not penalties) are imposed by a Court, rather than a bureaucratic regulator. The House of Lords are very protective of the Courts’ abilities and this area may well be one of contention. If the ‘fine’ is really a penalty and excessive, being based on global turnover, under English law, it would be unenforceable.
Unfortunately, as we’ve already seen, the Australian Senate doesn’t act in the same manner as the House of Lords. If a Bill with similar provisions was to presented to Parliament here, it’s likely to be passed. What purpose will the Courts then serve?
Regulators should regulate and nothing more.
Rather than throwing the baby out with the bathwater, we would do well to consider what we have now. Rather than rushing out and making similar enactments here.