Major changes to UK consumer law are imminent: is your business ready?

The consumer law provisions of the Digital Markets, Competition and Consumers Act 2024 are expected to come into effect in April 2025. As well as new rules on pricing, fake reviews and subscription contracts, B2C businesses will face a much tougher enforcement regime – with the prospect of fines of up to 10% of global turnover. We explain how you can protect your business from the risks and even use the legislation to your advantage.

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What consumer law changes are on the way - and when?

The Digital Markets, Competition and Consumers Act 2024 (DMCC Act) makes the following changes to UK consumer law, most of which are expected to be brought into effect in April 2025:

A much tougher enforcement regime: the Competition and Markets Authority (CMA) will gain a raft of game-changing enforcement powers, including the ability to impose fines of up to 10% of global annual turnover on businesses found to have infringed consumer law. And as we explain in section 2 below, fines are not the only risks facing B2C businesses in this space.
Renewed focus on pricing: the DMCC Act tightens up the law on misleading pricing practices, particularly around headline prices which do not reflect the true cost of products or services and "drip pricing." This is where a lower price is used to get consumers interested, only to discover that it doesn't take account of unavoidable further charges, which are typically only disclosed late on in the purchase process.
New rules on fake or misleading reviews: the DMCC Act effectively prohibits the submission or commissioning of fake reviews. It also requires businesses to ensure that they do not publish consumer reviews in a misleading manner and that they take "reasonable and proportionate steps" to prevent fake reviews and avoid misleading presentation of reviews more generally.
New rules on subscription contracts: businesses will be required to provide more information to consumers before entering into the contract, send reminders before a contract "rolls over" into a new term (auto-renewal) and allow "cooling off" periods. Whilst these provisions are not expected to come into effect until 2026, they may require significant changes to internal processes and IT systems.

Why worry?

In the past, infringing consumer law has often been seen primarily as a reputational risk for businesses – especially as most CMA investigations resulted in voluntary undertakings not to repeat the conduct in future and nothing by way of sanction. However, in the post-DMCC Act world, B2C businesses face a much higher risk of a substantial financial hit from serious non-compliance:

        Infringing consumer law: a significant financial exposure
    
Fines for past conduct:  previously, regulators have had very little scope to impose meaningful sanctions for past conduct.  But the DMCC Act will give the CMA power to impose fines of up to 10% of global turnover. This is higher than in most EU countries.  In the sphere of competition law, such powers have enabled the CMA to impose fines of over £200 million.  In certain circumstances, the DMCC Act will also give the CMA power to make parent companies liable for breaches of consumer law committed by their subsidiaries.

Redress orders:  the CMA will also be able to impose "enhanced consumer measures", which could require compensation to be paid to consumers or early termination of contracts. In the financial services sector, redress schemes for misselling of PPI (imposed by the regulator under sectoral legislation) have resulted in pay-outs of over £38 billion (and billions more in associated costs).  Even where it's willing to close a case based on voluntary undertakings, the CMA is likely to expect businesses to offer to "right past wrongs" as part of any deal to avoid a formal decision and imposition of fines.

Private enforcement:  consumers have always had rights to seek redress privately, through the courts, for infringements of consumer law.  A more recent development is the rise of law firms specialising in bringing group litigation on behalf of consumers, most notably in the competition law field but also in the consumer law space – such as the group litigation being brought against various vehicle manufacturers over the diesel emissions scandal.  Whilst the DMCC Act doesn't change the substantive law here, it is likely to encourage claimant law firms to explore more opportunities to bring claims in this area.

The EU dimension

Businesses that sell in the EU as well as the UK face the additional challenge of complying with a similar but slightly different set of rules, which is also evolving – for example, the EU has already tightened up the law on misleading pricing and required all national regulators to be given powers to impose fines of up to 4% of turnover in the relevant member states (for certain infringements). Meanwhile, the EU is in the process of a "Digital Fairness Fitness Check" of EU consumer law to check whether further changes are needed, primarily to address concerns about practices in the online environment.

It’s not just your reputation that's at stake – failure to comply with consumer law can seriously affect the bottom line

What's your risk?

In broad terms, the risk is generally likely to be lower where the product or service you sell is well understood by most consumers and your pricing is relatively straightforward i.e. it's easy to come up with an all-inclusive headline figure and most consumers will understand what is included in that price. Conversely, the risk is probably higher where those conditions are not met, as highlighted in the graphic below:

Other factors which may lead to an elevated risk

The risk for businesses is also likely to be higher where any of the following apply:

You sell products of an essential nature e.g. medicines, day-to-day necessities
You market to vulnerable consumers e.g. the elderly, children
You sell products or services which are high value
You operate a subscription business model
You provide consumers with a facility to post reviews of your products or services
You use sales staff to market directly to consumers

The general background risk

But even if none of the factors outlined above are present, the fact remains that the risk for all B2C businesses is increasing. For example, you may have a product which is priced very simply and is well understood by consumers, but when it comes to handling of defective product claims, consumers often get frustrated and feel they are being given the "brush-off" by staff. The CMA may well view such conduct as making it unnecessarily difficult for consumers to exercise their statutory rights to obtain a refund, repair or replacement for defective products – and therefore a serious breach of consumer law. It's also important to consider the risk posed to "well behaved", compliant businesses by "bad actors":

The "bad actor" risk

Previous cases have shown that all it takes is one bad actor for an entire sector – including businesses which are broadly compliant - to come under scrutiny from regulators. Under the DMCC Act, the CMA can impose significant fines for failure to respond to information requests or provision of misleading information. It has already done so on several occasions using similar powers in the competition law and merger control space – so the likelihood of the CMA taking similar action in relation to consumer law information requests is high. For a compliant business, the priority will be to see off any CMA investigation as quickly as possible, so that it will not have to divert resources away from its key business objectives. But in order to achieve this, care will be needed to ensure that responses to the CMA provide all relevant information, particularly where the request concerns internal documents or emails.

What should you be doing now?

Key questions to ask yourself include:

Are we in a higher risk category? (see section 3 above)
Are we sitting on any "ticking time bombs" in terms of our existing practices and processes involving consumers?
Are our existing processes (e.g. customer sign-up) likely to remain compliant and if not, how easy would it be upgrade them to e.g. meet the new rules on subscription contracts or misleading/fake reviews? Are there any longer term projects where the specification may need to be adapted to take account of the DMCC Act?
Are relevant staff – particularly those in sales roles – aware of the risks that infringing consumer law poses to the business? Do staff need a refresher on what types of behaviour or practices are likely to be problematic?
Do we have a plan for how we would respond if investigated by the CMA for breaches of consumer law? As noted above, the DMCC Act also significantly strengthens the CMA's investigatory powers and fines can be imposed for non-compliance with e.g. information requests.

It's also worth understanding how you may be able to use the legislation to your commercial advantage in certain situations. For example, if you play by the rules but other competitors don't, it may be worth considering making a complaint to the CMA or Trading Standards.

How we can help

We can help you to ensure that your business is prepared for these imminent changes. Our specially designed packages will equip you with the training, resources and analysis that you and your teams need to:

ensure your business is legally compliant and insulated from the most punitive aspects of the new regime; and
equip you with strategies for anticipating and managing CMA interventions.

We can also help you understand how the consumer law aspects of the DMCC Act interact with its other provisions and other legislation – and how you can use the regulatory framework to gain competitive advantage. To find out more, please speak to any of the contacts listed below.

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