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The Digital Markets, Competition and Consumers Act (DMCC) will transform the CMA’s consumer powers with the introduction of direct enforcement and fines of up to 10% of global turnover for non-compliance. But the CMA is not waiting until its new powers bite to take action. The regulator is cutting its teeth by actively pursuing enforcement under the existing regime. Recent weeks have seen (i) Wowcher as well as ASOS, Boohoo, and George (ASDA) agree undertakings with the CMA, (ii) a consultation letter issued to Worcester Bosch expressing concerns over misleading green claims in the heating sector and (iii) the CMA indicating that it will pursue court action against Emma Sleep if it fails to change its online practices.
Businesses should keep an eye on these developments as they provide a helpful steer on what the CMA will consider compliant under the new consumer regime.
The new regime under the DMCC is expected to kick in later this year although secondary legislation will provide more clarity on exactly when direct enforcement will come into force. CMA guidance is expected to set out how it proposes to exercise its new powers in this area. The key consumer provisions of the DMCC are:
At present consumer law comprises, in the most part, broad principles such as prohibitions on “unfair contractual terms” and “unfair commercial practices” (with the exception of certain detailed provisions such as the new rules on subscription contracts). However, published guidance and undertakings accepted by the CMA to end investigations provide a blueprint for how businesses can comply with consumer rules. It seems likely that the CMA is seeking to use the undertakings agreed with Wowcher, and those agreed with ASOS, Boohoo and George (ASDA), as a precedent for compliance across whole sectors (or even more broadly), as a benchmark for compliance in key risk areas: urgency, online choice architecture, pricing and green claims.
The Wowcher undertakings provide a helpful steer for businesses, especially those operating online, on ensuring that pricing, scarcity and popularity claims are made in a compliant way. These complement the open letter the CMA issued last year on pricing and urgency claims.
The key elements of the Wowcher undertakings are:
In addition, Wowcher has agreed to refund over £4 million to customers who were automatically enrolled into ‘VIP membership’ via a pre-ticked box. There is also a commitment to stop the use of pre-ticked boxes. This underscores the importance of online choice architecture and ensuring customers are able to make fully informed choices about the products and services they buy.
Drip pricing and bundles
In its guidance for green heating and insulation, the CMA provides further guidance on pricing which will apply across many other sectors. Pricing communications must be:
The undertakings agreed by ASOS, Boohoo and George (ASDA), alongside the latest guidance for the use of green claims in heating and insulating, are principle-based. In short, claims should be:
Although the CMA’s new powers to directly enforce and fine breaches of consumer law are not yet in force, this is still a fast-moving area. Decisions made in this period provide guidance on the approach that the CMA will take when its powers come into force. Businesses should carefully consider whether existing consumer compliance policies are up to the job in the new higher risk environment and engage with the detail of these precedents to ensure current practices are compliant, before the serious fines come on the agenda.
25 July 2024
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