Out-Law News 2 min. read

UK businesses to face increased scrutiny of online selling practices by CMA

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The UK’s Competition and Markets Authority (CMA) has ramped up its focus on applying its consumer law enforcement powers in relation to online selling across all industries.

Consumer law experts said businesses should review their selling and marketing practices and could face increased compliance risks.

The CMA announced on 30 November that it will embark on a new programme of consumer enforcement work by actively focusing on tackling potentially harmful online selling practices, such as ‘pressure selling’ tactics like urgent, time-limited claims and prominent discount offers that claim to provide greater discounts than the real price reduction. The CMA’s new enforcement focus covers all industry sectors.

The regulator categorises these kinds of selling practices and tools – including countdown clocks, limited stock claims and eye-catching discount offers via online channels – as ‘online choice architecture’ (OCA). Essentially, the OCA is the way websites, apps and devices were designed to interact with consumers. In a discussion paper published in April, the CMA said that companies could deliberately design digital tools to influence consumer’s buying decisions, including the order of products in search results, the number of steps needed to cancel a subscription, or whether an option is selected by default.

The paper identified 21 types of OCAs which are capable of being harmful to consumers including ‘drip pricing’; introducing charges towards the end of the purchase journey; ‘sludge tactics’, which make it more difficult for consumers to do what they want for example by adding friction to a cancellation process; ‘dark nudges’ such as one-click purchases; and scarcity and popularity claims, for example informing consumers about limited stock or limited time to buy.

As one of the first major enforcement actions taken by the regulator under the new programme, the CMA has launched an investigation into whether an online seller of mattresses misled consumers by using countdown timers and claims about time limits to imply that a discounted price will end soon when this may not be the case.

“The CMA is stepping up its focus on online selling practices. Businesses across all sectors, which sell to consumers via online channels, should review their selling and marketing practices to ensure their consumer interface does not use online choice architecture that may amount to pressure selling tactics that could infringe UK consumer protection laws,” said Angelique Bret, consumer law expert at Pinsent Masons.

Bret pointed out that consumer protection enforcement is already firmly on the CMA’s radar, both in terms of digital commerce such as social media endorsements and its ‘Online Rip-Off Tip-Off' campaign, as well as greenwashing claims which are made both via online and offline sales channels. The latest development particularly builds on the latter campaign, which was launched earlier this year to help educate UK shoppers about identifying and avoiding misleading online practices; and the CMA’s ongoing work in relation to OCA.

“While the current enforcement programme utilises the CMA’s existing consumer protection law toolkit, businesses should be mindful of forthcoming legislative reforms that will significantly increase the CMA’s enforcement powers, including by enabling the authority to determine consumer law infringements without resorting to court action and the ability to impose maximum financial penalties of 10% of the business’ annual global turnover. These legal changes will substantially increase compliance risks for consumer-facing businesses active in the UK,” said Tadeusz Gielas, consumer law expert at Pinsent Masons.

The UK government is expected to publish its much-awaited Digital Markets, Competition and Consumer Bill imminently, which is likely to bring significant reform of UK competition and consumer protection laws and give the CMA new powers to impose significant fines in relation to consumer law breaches. The Bill will also provide the legislative basis for the UK’s new digital regulation regime that will be enforced by the Digital Markets Unit.

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