Out-Law News 3 min. read

Consumer focus and powers at heart of CMA proposals

The UK's Competition and Markets Authority (CMA) could have greater scope to address consumer detriment stemming from "digitalisation", such as the harvesting of personal data or personalised pricing, under plans it has put forward for the government to consider.

In response to a request from the government last summer, the CMA has outlined a number of recommendations for "legislative and institutional reforms" aimed at better safeguarding consumer interests and improving public confidence in markets.

Among the most significant changes proposed by the regulator is a change in the law to alter the statutory duty that the CMA and courts are subject to. According to the plans, the CMA would have an overriding duty to "ensure that the economic interests of consumers, and their protection from detriment, are paramount".

The CMA said its ability to intervene to protect consumer interests is currently "constrained" by the existing statutory duty it is subject to, as it limits actions the regulator can take to protect consumers’ interests to "purely competition-based remedies". This presents a problem given the "new forms of consumer detriment" that have emerged as a result of digitalisation, it said.

"An overriding statutory duty to promote the consumer interest would give clear legislative authority to the CMA to address consumer detriment, including new and emerging forms of detriment, and including the protection of vulnerable consumers," the CMA said. "And it would ensure that concerns about consumer detriment, and how best to remedy it, are uppermost in the CMA’s mind when deciding whether, when and how to intervene in markets."

Other proposals outlined by the CMA would also strengthen its ability to address consumer law issues and align it with the competition enforcement regime.

Included in those plans are recommendations to allow the CMA to make mandatory information requests to businesses, and to impose fines for providing false or misleading information. The CMA would further gain powers to determine whether there has been a breach of consumer law instead of having to go to court for an order for that purpose, and would be able to impose fines on, and director disqualification orders against, senior executives responsible for non-compliance.

The regulator has further called for changes to be made to the existing market study and market investigation regimes to allow commitments or remedies to be agreed or imposed at an earlier stage in the process, so as to speed up the process of its consumer law interventions in markets.

A further important proposal is that businesses would be obliged  to notify the CMA of mergers they intend to enter into where those deals surpass a certain threshold. Merger notification is currently voluntary in the UK, although major consolidations must currently be notified to the European Commission under its merger control regime. 

The CMA would further be able to impose fines on individuals in civil competition cases, according to the proposals. In addition, businesses would only be able to bring an appeal against decisions by the CMA to the Competition Appeals Tribunal (CAT) on limited judicial review grounds. The proposals also envisage that criminal competition cases might be dealt with instead by the Serious Fraud Office.

"Consistent with its focus on cases which directly impact consumers, the CMA is calling for more robust powers in respect of consumer protection investigations, to align these more closely with its competition enforcement powers," competition and consumer law expert Angelique Bret of Pinsent Masons, the law firm behind Out-Law.com, said.

"Under the proposals, the CMA would have the power to determine whether there has been a breach of consumer protection laws and to be able to impose fines and director disqualification orders, in addition to remedies for which the company could be fined for breach. This would represent a significant shift in power given that under the current regime the CMA can agree commitments with companies to make changes to their business practices but these changes can be enforced only by court order," she said.

Andrew Tyrie, chair of the CMA, said the proposals are "intended to enable the CMA to intervene earlier and more robustly to tackle consumer detriment, and to penalise and deter wrongdoing when it occurs". He said they also represent "probably the most practical early route to ensuring that the CMA can better meet the expectations of parliament and the wider public, and address the government’s very reasonable concerns about the growth of consumer detriment".

"Taken together, they would mark a decisive shift in favour of the consumer and of businesses that behave fairly and competitively, and against those businesses that, among other things, take advantage of consumer vulnerability," Tyrie said.

Business secretary Greg Clark said the CMA's proposals "provide a firm basis for further work".

"They are an encouraging step in the right direction and should now form part of the proposals on which we will consult in the competition review," Clark said.

The competition review is expected to commence by April and will look at whether the powers that the CMA has at its disposal are fit for the digital age.

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