On 20 April 2022, the government published its response to the Department for Business, Energy and Industrial Strategy’s (BEIS) consultation on consumer and competition issues. In its response, the government provided a summary of the consultation responses as well as the proposals that it intends to take forward.
Whilst we await further details in light of the Queen’s speech on 10 May 2022 and the announcement of the Digital Markets, Competition and Consumer Bill, B P Collins’ corporate and commercial team has provided an overview of the reforms to consumer protection law and enforcement that are being considered.
This week, we will focus on the proposals relating to consumer protection law. Next week, we will look at the reforms to consumer law enforcement.
Tackling subscription traps
Consumers have raised the issue that they have been misled into entering into a paid subscription service, often through an introductory ‘free trial’ or reduced price offer. In its response, the government says that it will make the following changes to tackle subscription traps:
- ‘clarify and enhance existing pre-contract information requirements for subscription contracts;
- introduce a specific requirement on traders to send reminders to consumers before a contract rolls over (or auto-renews) onto a new term;
- create a specific obligation requiring traders to remind consumers that a free trial or low-cost introductory offer is coming to an end; and
- create a specific requirement for traders to ensure their consumers are able to exit a contract in a straightforward and timely way’.
There will be some sectors that would be exempt from the new rules. Those that had equivalent or stricter rules in place already such as insurance or certain essential sectors such as the supply of medicine would not have to follow the proposed rules relating to subscription traps.
With sustained growth in online sales, consumers are now more reliant on consumer reviews to find out information about a product or service. This has sharpened the focus on ensuring that reviews, which have been commissioned or incentivised, are labelled clearly as such so that consumers are not misled.
The government will also consult on what ‘reasonable and proportionate’ steps businesses should take to ensure that reviews are genuine.
Furthermore, the government states that it will look to add ‘the practice of traders offering or advertising to submit, commission or facilitate fake reviews’ to the list of blacklisted practices, which are deemed to be automatically unfair, in the Consumer Protection from Unfair Trading Regulations 2008 (CPUTs).
This would mean that the CMA could bring court proceedings against businesses that offer, advertise, commission or facilitate fake reviews. Directors and managers of companies, who are found guilty of the blacklisted practice could face an unlimited fine and/or imprisonment for up to two years.
Preventing online exploitation of consumer behaviour
The government is looking at practices that exploit customer behaviour. Some of these behavioural techniques include ‘drip pricing’ (where the total price for a product or service is only revealed at the end of the buying process) and paid-for search results that are not labelled as such.
The government believes drip-pricing and incorrectly labelled paid-for search results are likely to breach the CPUTs.
They have also observed that ‘consumers were not aware of businesses using behavioural techniques to influence choice’ but note that ‘much is still unknown about the scale and prevalence of harm’ so further research is needed.
The government is looking at how it can protect consumers who pay in advance for goods and services.
In particular, the government looked at Christmas Savings Clubs that are not covered by existing financial protections. The current risk with these schemes is that the provider may become insolvent and consumers who are participating may not be able to get their money back through the insolvency process.
The government will also consider other sectors where new powers for prepayment protections could be implemented but also noted that there may be legitimate reasons for prepayment. For example, some online retailers and grocery businesses currently delay the formation of a sales contract.
Online retailers use this practice as there may be pricing or stock errors and grocery businesses will often need to procure the products at a particular time due to their perishable nature. Therefore, it is likely that the government will look to legislate particular sectors where prepayment protections are most needed as opposed to a general ban on this practice.
The government commented on the Package Travel and Linked Travel Arrangement Regulations 2018 (PTRs), which offer protections to consumers who book package travel such as: ensuring consumers are refunded within 14 days of a cancellation, information that must be provided to a consumer and provisions in the event of insolvency of a package organiser.
It stated that these regulations were tested during the coronavirus pandemic and performed ‘as well as could be expected.’ However, the main criticism that the PTRs have faced, is that they are too complicated and consumers did not understand these regulations. The government will now look to enable BEIS to simplify aspects of the PTRs.
The government’s response suggests that these proposals are likely to be implemented gradually.
Whilst many changes may be included in the recently announced Digital Markets, Competition and Consumer Bill, not all proposals will be included in the bill. Areas such as online exploitation of consumer behaviour appear to require further research and are likely to be acted upon at a later date.
For more advice or information on consumer protection, contact our Corporate and Commercial team on email@example.com or call 01753 889995.
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