Out-Law News | 19 Jun 2019 | 8:51 am | 2 min. read
The plans, which are to be subject to formal consultation, would represent a significant change away from the current UK enforcement regime where only courts can determine that consumer law has been broken.
...the procedure would need to ensure that the parties concerned can properly defend themselves...
Competition and consumer law expert Angelique Bret of Pinsent Masons, the law firm behind Out-Law, said: "If these changes are introduced, they are going to have a significant impact on businesses and introduce a level of risk against which will be difficult to mitigate. The CMA is keen to have similar powers to those it has in relation to the competition law regime, to enable it to more effectively force companies to make changes to their business practices. However, there is a difference between a price fixing cartel, where fines are necessary for deterrent effect, and at the other end of the scale, having certain terms of business which are, arguably, not sufficiently clear and transparent to the consumer."
"The consumer protection rules involve a certain level of subjectivity around what is 'unfair' or sufficiently 'transparent'. Under the current system, the CMA requires companies to enter into formal undertakings to make certain changes to their business practices and/or their terms and conditions on the basis that the CMA has concerns about their compatibility with the consumer protection rules. There is the threat of the CMA going to court for an enforcement order if the company does not commit to making the changes required by the CMA. This is arguably a sufficiently robust system to remedy most consumer protection concerns. Only rarely has the CMA taken formal action where changes have not been agreed and/or have been agreed but have not been implemented," she said.
"If the CMA is to have fining powers, these could be reserved for the most serious breaches of consumer protection law. If the CMA proposes to take formal decisions that a certain activity amounts to a breach of the consumer protection rules, the procedure would need to ensure that the parties concerned can properly defend themselves – with written and oral submissions. This could add time and cost to the CMA investigation process and may lead to more challenges in the courts," Bret said.
The UK government has also set out recommendations for how the CMA and other sectoral regulators should address the so-called "loyalty penalty" that consumers are said to face in some markets.
UK business secretary
I am committed to ensuring that the legal framework prohibits business practices that are harmful to consumer interests...
"We have a robust legal framework that provides strong protections for consumers," said business secretary Greg Clark in a letter to CMA chief executive Andrea Coscelli. "It is therefore extremely concerning that some businesses are employing practices which adversely affect the interests of loyal consumers and contribute to the loyalty penalty. I am committed to ensuring that the legal framework prohibits business practices that are harmful to consumer interests, addresses contract termination and provides robust remedies for any consumers harmed and that these are robustly enforced. I firmly endorse the cross-market principles of good business practice in dealing with their customers."
Clark said: "The government expects these to guide regulators in their approach to enforcement: exit/entry equivalence: people must be able to exit a contract at least as easily as they can enter it; auto-renewal should generally be on an ‘opt-in’ basis upfront, and include a clear and prominent option without auto-renewal in most markets; exit fees should not be used after any initial minimum/fixed term; auto-renewal onto a fresh fixed term should not generally be used; customers must be sufficiently informed about the renewal and any price changes (through sufficient notifications) in good time; switching should generally be managed by the gaining supplier so that customers do not have to contact their existing supplier if they want to move.
Bret said it is likely that these points will be reflected in any future undertakings the CMA seeks to secure from businesses in relation to auto-renewal practices.
The government's proposals come after the CMA outlined recommendations for "legislative and institutional reforms" aimed at better safeguarding consumer interests and improving public confidence in markets earlier this year.
26 Feb 2019