New reforms, including new powers for the competition regulator to tackle subscription traps and fake reviews will boost competition and shield the public from rip-offs so people can spend with confidence.
The proposals come in the new consultation on Reforming Competition and Consumer Policy, which delivers on the government’s manifesto commitment to “give the Competition and Markets Authority enhanced powers to tackle consumer rip-offs and bad business practices.”
Competition in markets helps newer and smaller businesses get a fair shot, free of monopolists unfairly throwing their weight around, while a strong set of consumer rights means that the businesses offering the best service are rewarded with more market share.
Proposals to change the law in favour of online consumers include:
- Savings clubs - prepayment schemes like Christmas savings clubs will have to safeguard customers’ money as they save for the holidays, to prevent scandals like Farepak where tens of thousands of people on low incomes lost all they had saved for Christmas.
- Used car and home improvement sectors - for large, important one-off purchases, the government will make it mandatory for businesses to take part in arbitration or mediation where disputes arise over a transaction. This means both sides won’t get dragged through the courts and levels the playing field for decent businesses who are doing the right thing.
- Subscription traps - businesses will be required to make it clear exactly what consumers are signing up for and letting them cancel easily, to ensure people can spend their hard-earned cash with confidence.
- Fake reviews - consumer catfishes behind bogus online ratings will be targeted by rules that make it automatically illegal to pay someone to write, or host, a fake review.
- Other dodgy tactics used to dupe online shoppers - ‘dark patterns’ that manipulate consumers into spending more than they wanted to, and ‘sludges’, negative nudges such as when businesses pay to have their product feature highly on a trader’s website while hiding the fact they paid for it.
Tough penalties for non-compliance are being put forward, with new powers for the CMA and similar enforcers to hit unscrupulous traders who breach consumer law with fines of up to 10% of their global turnover, and civil fines for businesses who refuse or give misleading information to enforcers.
Government is also considering several options – including introducing financial penalties – when firms breach the commitments given to enforcers that they will change their ways.
To speed up processes, the CMA will also be able to enforce consumer law directly rather than having to go through a court process that can take many months or even years – meaning consumers are protected more quickly.
Under the plans, the CMA will be able to wrap up investigations faster and impose stronger penalties on firms that break the law or fail to cooperate with the regulator’s work.
What is 'competition' and why does it matter?
Competition supports firms by driving creativity and productivity as they compete against each other for business. And, because the customer is the focus of a competitive market, it gives ordinary consumers access to better products, greater choice and lower prices.
Anti-competitive conduct - such as when companies collude to bump up prices - shuts out smaller businesses and can cost consumers billions.
Competition & Markets Authority (CMA) reform
The government is committed to a competition regime which is efficient and predictable. Harms to consumers should be remedied quickly, and costs and uncertainty for business should be reduced.
Between 2014 and 2020, the CMA delivered benefits to consumers worth over £7 billion over the last 3 years, but recent studies including the Furman Review and Penrose Report have found that even more could be done to improve competition.
The government is therefore proposing a package of reforms to ensure the UK has a ‘best in class’ competition regime in line with the ambition set out in the Plan for Growth. The plans would allow the CMA to:
- impose stronger penalties for companies that don’t comply with its investigations or orders, with new powers for fixed penalties of up to 5% of annual turnover and additional daily penalties up to 5% of daily turnover while non-compliance continues
- disqualify company directors who make false declarations to the regulator
- accept voluntary binding commitments from businesses at any stage in its investigations, rather than having to wait till the end - leading to quicker outcomes and reduced costs for both businesses and the regulator
- block a wider range of harmful mergers, including so-called ‘killer acquisitions’ where big businesses snap up prospective rivals before they can launch new services or products
On mergers, to keep the burden on smaller businesses to a minimum, government proposes that mergers between small businesses – where each party’s turnover is less than £10 million – be removed from the CMA’s merger control altogether.
Going forward, government will provide the CMA with more regular steers on which areas of the economy to focus its investigations on. The CMA will also need to produce regular ‘State of Competition’ reports looking at the vibrancy of competition in the UK’s markets.
Government believes that competition policy can do more to support the Ten Point Plan for a Green Industrial Revolution, and has therefore asked the CMA to prepare advice on how competition law can better support the UK’s transition to a net zero economy.
The government has today also launched a consultation seeking views on the objectives and powers of the Digital Markets Unit. Proposals include placing a mandatory code of conduct on tech giants with deep-rooted market power to drive up competition and new powers to issue fines of up to 10% of turnover for serious breaches. The proposed new measures are expected to help British start-ups and scaleups compete more fairly against those big tech firms with powerful positions in the market.