Heavy digital focus to new UK consumer and competition law plans

Out-Law News | 12 Apr 2018 | 3:08 pm | 5 min. read

The UK government is to consider whether the powers that the Competition and Markets Authority (CMA) has at its disposal are fit for the digital age as part of a major review of the UK's competition law framework.

The Department for Business, Energy & Industrial Strategy (BEIS) announced on Wednesday that it would undertake the review by April 2019.

"We will assess the ability of our competition regime to respond effectively amidst rapid changes especially in the digital economy, and whether we have the right policy and administrative tools for competition to benefit consumers and the wider economy," BEIS said.

The government is obliged to carry out a review of aspects of the UK's competition regime under the Enterprise and Regulatory Reform Act (ERRA). The statutory review will look at the impact of reforms the ERRA delivered in 2014, including the effectiveness of the enhanced powers that were given to the CMA in respect of scrutinising mergers and investigating markets. It will also assess the operation of competition laws provided for in part 1 of the UK's Competition Act.

However, BEIS announced that it would look beyond the scope of the statutory review to whether the UK's competition regime "is keeping pace with changes in the economy".

"There is some concern internationally that existing competition regimes may not be able to address the wider challenges raised by digital markets, for example that platforms may lock-in consumers or leverage their market power to detrimentally influence other markets," BEIS said. "We want to hear views on how the regime should be adapted for the digital economy, including how it should address digital platforms, agglomeration, data algorithms and the consolidation of competitors. We would like to hear views as to whether the powers within the existing UK competition framework are adequate for addressing these challenges."

Competition law expert and specialist on Brexit matters Guy Lougher of Pinsent Masons, the law firm behind Out-Law.com, said the review represents an opportunity to ensure that the UK’s competition law enforcement regime is "fit for purpose to meet the unique challenges posed by digital markets".

"Competition authorities have recently been debating issues affecting online markets such as how to treat online pricing algorithms, which are increasingly used to by companies to set prices, if those algorithms automatically fix prices leading to collusion without the need for actual contact between competitors," Lougher said. "There is also a concern that algorithms and online platforms could use personal data to discriminate between consumers, effectively displaying higher prices to consumers that may be willing to pay more."

"In November 2017, the CMA also announced plans to launch a dedicated 'data unit' employing data scientists and computer experts to enhance its understanding and capabilities to take on 'big digital cases'. This development combined with the proposed review shows how seriously both the CMA and the government are taking enforcement in online markets," he said.

"This should also been seen in light of UK’s pending withdrawal from the EU, as depending on the outcome of the review, there is the potential for divergence both in terms of enforcement and interpretation of the law. It is therefore sensible for the government to undertake its review now, before Brexit occurs, to ensure that due consideration is given to the future shape and detail of the UK’s competition regime post-Brexit, and also so that any necessary legislative changes can be implemented in good time," Lougher said.

BEIS announced its review in a new 'green paper' on modernising consumer markets (76-page / 1.66MB PDF). The paper outlined a package of measures to update the UK's competition and consumer law frameworks.

In its paper, the government set out plans for a new strategic steer to the CMA. The government's strategic steer is non-binding but outlines its expectations in respect of where it believes the CMA should focus its attention. If introduced as drafted, the steer would, among other things, call on the CMA to take steps that align with the government's industrial strategy aims, which include boosting productivity and growth.

The government said it has also nominated Andrew Tyrie, the former chair of the Treasury Select Committee in the UK parliament, as the new chair of the CMA.

According to the paper, the government is also considering giving consumers enhanced rights to data portability in regulated markets, such as energy, insurance and telecoms. It announced a "smart data review" to look into the option, which would build on rights that consumers will shortly begin to enjoy under the EU's General Data Protection Regulation, and complement data access rights provided for in the UK's 'open banking' regime.

BEIS said that it wants to ensure "consumers can use their own data to get the best deals and drive competition" and highlighted the limitations of the GDPR's data portability rules.

"Whilst the [GDPR] requires data requested through the data portability right to be provided in a ‘commonly used format,’ it does not guarantee standardised formatting of the data for ease of use by a consumer or another business," BEIS said. "Also, organisations that receive a request under the data portability right have a month to respond which may delay switching between services. The right only applies to personal data collected under certain circumstances: data captured automatically; explicitly provided by individuals (e.g. when filling out a form on a website); or generated as part of an individual’s activity (such as smart meter data). This may limit the impact of the right across online sectors."

"To take full advantage of this new right and make data portability a reality for consumers in other markets, the government has commissioned research to understand how greater portability could make a real difference to competition and to engage with business to understand what actions are needed to deliver these benefits," it said.

Among the other initiatives announced in the BEIS paper were plans for new legislation which would give civil courts powers to impose fines on companies for breaches of consumer law.

BEIS said: "All consumer law enforcers, including the CMA and Trading Standards will be able to ask the courts to impose fines either as a standalone remedy, or in conjunction with the existing civil remedies such as injunctive relief, enforcement orders or enhanced consumer measures. The financial penalty will be subject to a total cap of 10% of a firm’s worldwide turnover, in line with the limits for fines that can already be imposed in some of the regulated markets."

Competition and consumer law expert Angelique Bret of Pinsent Masons said that the CMA’s consumer law enforcement team has already been "particularly active in online markets with recent investigations focusing on cloud storage, secondary tickets, trader reviews, online gambling, online dating and hotel bookings".

"Although the proposed changes would not allow the CMA itself to impose fines, which it can currently do for competition law infringements, it still represents a significant increase in enforcement powers, broadening the risk of significant fines to a much wider number of problematic behaviours which fall under the civil enforcement regime," she said.

The government also announced that it is considering requiring businesses in some sectors "in which there are high levels of high value complaints, such as second-hand cars and home improvements", to engage in alternative dispute resolution (ADR).

Businesses can also expect new guidance to be issued by the Behavioural Insights Team, a part government-owned company, "on presenting terms and conditions and privacy notices online".

BEIS has also asked for views on whether the existing legal framework covering consumer-to-consumer transactions is "appropriate to promote consumer confidence" in light of the growing role of online platforms in facilitating such transactions.

"We want to ensure that our legal framework is the right one for the future, to support consumer-to-consumer transactions, and other forms of disintermediation in which consumers buy from other consumers," it said.

The government's announcement also revealed that a new Consumer Forum is to be established to enable the government and sectoral regulators to better coordinate with one another and other experts to address "current and future challenges", such as "technological change and the power of data and new business models".