The Digital Markets, Competition and Consumers Act (the “DMCC Act”) received Royal Assent on 24 May 2024, after being passed during the wash-up period.

The DMCC Act will have wide-ranging impact, by introducing changes to the regulation of digital markets, competition, and consumer protection and enforcement.

In this article we will focus on the key changes to the consumer protection regime, namely changes to: the rules on unfair commercial practices, the rules regarding subscription contracts, and the consumer protection enforcement regime. The DMCC Act also addresses concerns regarding fraud in the secondary ticketing market, and introduces greater protections for those using consumer savings schemes. The DMCC Act brings about significant reform to the UK consumer protection regime and represents the UK’s first major step away from EU-derived consumer protection law.

For insight into the regulation of competition, you can read more in our separate article available here.

Unfair commercial practices

The DMCC Act responds to the evolving online marketplace and changing consumer behaviour by introducing new consumer rights to prohibit harmful practices by businesses and ensure better consumer protection.

Currently, the Consumer Protection from Unfair Trading Regulations 2008 (the “CPRs”), which implemented EU Directive 2005/29/EC, prevent traders from engaging in unfair commercial practices with consumers, including by prohibiting misleading actions and omissions, and establishing a list of specific commercial practices which are considered unfair in all circumstances. The DMCC Act revokes and restates the CPRs, but with a few important amendments. It also introduces entirely new sections.

Fake reviews

A notable addition to the list of prohibited practices is the use of fake reviews, which was added at a later stage of the DMCC Act’s progress through Parliament following a consultation towards the end of 2023. The introduction of the fake review ban stems from the Government’s concerns about the growing prevalence of fake reviews and the importance of reviews in consumers’ purchasing decisions. Research commissioned by the Government found that 11-15% of online reviews are fake, and that fake reviews cause roughly £50 million to £312 million of detriment to UK consumers annually. Prior to the DMCC Act, there was no legislation which directly prohibited fake reviews.

What does the DMCC Act say about fake reviews?

Under the DMCC Act, a fake review is defined as “a review of a product, a trader or any other matter relevant to a transactional decision… that purports to be, but is not, based on a person’s genuine experience”.

Under the DMCC Act, various practices relating to fake reviews will be automatically unfair, including:

• Submitting or commissioning another person to submit or write a fake review, or a review that conceals the fact it has been incentivised.
• Publishing reviews in a misleading way. This includes failing to publish or removing negative reviews whilst publishing positive ones (or vice versa), giving greater prominence to positive reviews over negative ones (or vice versa), and omitting information that is relevant to the circumstances in which a review has been written.
• Publishing reviews without taking such reasonable and proportionate steps as are necessary to prevent the publication of, and remove from publication, any fake reviews or reviews which conceal that they have been incentivised.

The Government has acknowledged that the concept of “reasonable and proportionate steps” requires further explanation, and may change over time. At this stage the Government has indicated that this obligation is likely to require traders to have policies for proactively assessing risk, detecting suspicious reviews, removing fake reviews, and sanctioning and reporting those involved. The Government has also stated that it will work with the Competition and Markets Authority (the “CMA”) to produce guidance on this obligation.

Drip pricing

Provisions on “drip pricing” were also introduced in the later stages of the DMCC Act’s progress through Parliament. Drip pricing involves enticing consumers with lower headline prices, while revealing additional charges later in the checkout process, such that the full amount to be paid is only revealed when the consumer is about to complete the purchase and pay.

Under existing UK consumer protection law, businesses are already obligated to provide consumers with clear information about pricing and additional charges. Failing to do so in a way that could impact a consumer’s purchasing decision could be considered a misleading action or omission, or an otherwise unfair practice, under the CPRs. Nevertheless, drip pricing remains widespread, and has been the subject of CMA enforcement action. Recognising the harm to consumers caused by being unable to make informed choices, the Government decided to take action against drip pricing.

How is drip pricing addressed by the DMCC Act?

Unlike the provision on fake reviews, drip pricing has not been added to the list of practices which are considered unfair in all circumstances. Instead, the list of material information to be provided when making an invitation to purchase has been amended to explicitly include costs which the consumer will necessarily incur, as well as certain costs which the consumer may choose to incur. This means that where businesses do not provide consumers with information about additional costs up front, they are at risk of committing the unfair commercial practice of omitting material information from an invitation to purchase. The aim of the provision is to ban hidden fees, by requiring the total price (or how to calculate it), to be made clear at the start of the buying process.

Unlike the position under the CPRs, the DMCC Act makes it clear that to establish an unfair commercial practice, the omission of material information does not need to have caused the consumer to make a decision that they would not otherwise have made. This should make the new prohibition on drip pricing easier to enforce.

Subscription contracts

Subscription contracts which, for example, offer services at a reduced rate or free of charge for an initial period, are commonly offered by consumer-facing businesses. These contracts often renew automatically on less attractive terms after the initial period, unless the subscriber terminates the contract. While these contracts are not in themselves problematic, the issue arises where the steps involved in terminating contracts are difficult, or the terms and conditions are unclear, resulting in consumers struggling to cancel them or being unaware that their contract is continuing but on less favourable terms. Many consumers end up paying for services that they do not need as they are not reminded when the initial period ends, or what the new terms will be.

The DMCC Act addresses this issue by introducing provisions on subscription contracts. Our previous article addresses the requirements introduced by the first draft of the DMCC Act (as published in April 2023), and provides further context. Since then, there have been a number of changes to the legislation. The main provisions relating to subscription contracts (including some of the recent changes in the final text of the DMCC Act) are discussed below.

Pre-contract information

• Where a trader enters into a subscription contract, it must give the consumer “key pre-contract information” as well as “full pre-contract information” (to the extent applicable) such as information about the contract’s auto-renewal mechanism, the charges that apply after any initial trial period and details of how the consumer can terminate the contract.

Reminder notices

• The DMCC Act includes requirements on when reminders for subscriptions must be given depending on the frequency of renewal payments due under the contract. A key change since the first draft of the DMCC Act was published is that originally reminder notices had to be given separately to other information. This has been amended, so that the requirement is now for the information in reminder notices to be more prominent than any other information (for example marketing information) shared with the consumer at the same time.

Ending contracts

• Under the DMCC Act, traders must facilitate the consumer ending the subscription contract in a “straightforward” way and without having to take steps that are not reasonably necessary to end the contract. The original draft of the DMCC Act required the trader to provide a way for the consumer to cancel with “a single communication”, but the new, more business-friendly wording was introduced at the House of Lords Report Stage so as to allow traders to engage with their subscribers during the exit process and, for example, make counter-offers to persuade them to stay.
• A further change since the draft version of the DMCC Act was originally published is that consumers are no longer able to exercise their right to cancel “by any means”. This original wording was very broad, and could have caused issues if consumers chose to utilise unconventional methods of communication. Instead, consumers must make “a clear statement setting out their decision to bring the contract to an end”. Further, in respect of subscription contracts entered into online, consumers must be able to terminate the contract online.

Cancellation rights

• Under the DMCC Act, a consumer can cancel a subscription contract, without any penalty, at the following times:
  • during the initial cooling-off period (meaning within 14 days of the contract being entered into or, in the case of a contract for the supply of goods, after the consumer receives the first supply); and
  • during any renewal cooling off-period (meaning within 14 days of the expiry of an initial free or discounted period, or any renewal which commits the consumer to a further period of at least 12 months).
• Cooling-off rights are more onerous for traders under the DMCC Act than they are under the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 (the “CCRs”) which also provide for a right to cancel. For example, the CCRs only provide cooling-off rights in relation to distance contracts and off-premises contracts. Under the DMCC Act, consumers will benefit from cooling-off rights even where they sign up to a subscription contract in store.
• One notable development is that the original draft published in April 2023 did not address the scenario where a consumer exercises their right to cancel during the cooling-off period, but has chosen to be supplied with the digital content or services during that period. The earlier draft simply provided that secondary legislation could impose conditions on the right to cancel. The DMCC Act now explicitly envisages that secondary legislation could be enacted under this provision to the effect that if a consumer chooses to be supplied with the digital content or services during the cooling-off period, they will lose their right to cancel. This approach aligns the DMCC Act more closely with the approach taken under the CCRs.

Under the DMCC Act, the obligations listed above become implied terms in subscription contracts. In most cases, the consumer may cancel the contract without penalty if any of these terms are breached by the trader.

Enforcement

There have been no significant changes to the enforcement regime since our last article on the enforcement regime.

In brief, the DMCC Act sets out a new enforcement regime which allows the CMA itself to decide whether certain consumer protection legislation has been breached. The CMA will now be able to enforce consumer protection law directly through administrative proceedings. The potential financial liability for businesses has also increased with the DMCC Act providing the CMA with the power to directly impose a fine up to 10% of the infringer’s global turnover. These changes significantly strengthen the powers of the CMA, who under the current regime (which will remain in place) must apply to the court for an enforcement order where it suspects a relevant breach. Its new ability to take faster, more effective action may well result in increased enforcement activity by the CMA. Coupled with the potentially significant monetary penalties, this may act as a greater deterrent to breaches of consumer protection law for UK businesses.

Next steps

Most substantive provisions of the DMCC Act are expected to come into force in Autumn 2024. Draft guidance and consultations on certain aspects of the DMCC Act are also expected in the coming months.

Now is a good time for businesses to evaluate their practices to ensure compliance with the new, more stringent consumer protection law requirements. Key priorities for businesses should include reviewing their purchase journeys, terms and conditions, and customer interface (if their services are supplied online). Additionally, companies displaying reviews about their products or services should ensure they have policies in place to monitor, remove and report false and misleading reviews.

We will continue to monitor developments in this space. Please reach out to discuss how we can help you to navigate the changes brought about by the new digital markets, competition and consumer protection regime.