The consumer power shift

By Jay Barnett, Associate Solicitor at DMH Stallard

The Government has proposed reforms to enhance consumer rights and the way those rights are enforced. The proposals, which were out for consultation until October 1st 2021 if implemented in their current form, will have a significant impact on both businesses and consumers, much in the same way GDPR hit businesses back in May 2018. In this article, we look at what those proposals are, and what businesses should consider doing now. THE ROLE OF THE CMA A key reform currently on the table, is to increase the Competition and Markets Authority’s (CMA) reach, whereby it could be allowed to:

n fine businesses up to 10% of their global turnover for infringing consumer law; n levy civil fines for businesses which mislead or don’t cooperate with the

CMA – including personal liability for directors/owners; and n levy fines itself – this is a big one as currently it has to bring a claim and ask the courts to impose a fine where wrong-doing is found.

The reforms as proposed would place the CMA at the frontline of consumer-related issues, with extensive powers over businesses to ensure compliance as well as overseeing a streamlined penalty process: the CMA may become the consumers’ biggest weapon.

CONSUMER POLICY REFORMS In addition to the CMA’s proposed extra powers, the Government wants to introduce additional consumer protection; this flows from the increased trend in online shopping during the pandemic. Additional measures may include:

n Pre-contract Information: Help to avoid consumers falling into ‘traps’, such as unreasonable minimum contract terms, auto-renewals and unfair minimum notice periods for cancellation. Consumers should also expect to receive clear, pre-contract information, prior to purchasing a product or service.

n Subscriptions: New rights could be granted to consumers allowing them to have an easy, hassle-free way of cancelling subscriptions. This would not only do away with long cancellation notice periods, but also impose an obligation on businesses to remind its subscribers that their subscription is still active – no more would consumers be allowed to forget about fallow memberships, or subscriptions. n Online Reviews: A ban on businesses paying or incentivising consumers to submit reviews is proposed. This may also extend to restrict or outlaw the use of influencers and brand ambassadors. n Arbitration and Mediation: It could become mandatory for businesses to take part in arbitration and mediation in order to encourage faster, independent dispute resolution for consumers regardless of what may be in the business’ terms. WHAT TO DO NOW Since the consultation period has now closed, we should begin to learn more about the Government’s plans and the timetable for their introduction in the coming months: watch this space.

n Safeguarding all Pre-payments: If your business holds consumer money as a form of pre-payment, you may be required to “ring fence” and protect that money if your business should fail. n Prohibiting ‘Dark Patterns’: ‘Dark

Patterns’ (using algorithms to manipulate consumers into spending more) could be banned entirely.

These proposals would see obligations imposed on a business, both practically, in how it sells to its customers, as well as legally, in respect of the terms and conditions it uses. MORE BAD NEWS… For those who sell into EU, the position will be more complicated going forward. The EU has adopted a directive (the Omnibus Directive) which, like the UK Government’s proposals, aims to strengthen consumer rights through enhanced enforcement measures and increased transparency requirements. A key difference, however, is that we have certainty as to the new EU regime: Member States have until November 28th 2021 to implement the Omnibus Directive and must apply measures under it from May 28th 2022.

Whilst you may consider it premature to do anything now, we do know, from our experience with GDPR, that many businesses are less than compliant and that it can be a costly (and a somewhat stressful experience) to undertake wholesale change in one step. Now is as good a time as ever to look to plug gaps in compliance with current laws so that you are better prepared for the proposed changes. A few things to look out for include:

n Terms and conditions for consumers should be written in plain, clear and easy to understand language (i.e. no legal jargon!). n Undertake an audit of compliance with current consumer rights legislation and, in particular, around returns and cancelation rights. n If you are selling into the EU, you should start to put your house in order now. You could adopt a “one size fits all approach” or look to separate out your UK and EU trading terms.

If you want some certainty now, all we can say is, as Sam Cooke sang, “Change is Gonna Come”!