The trial period is over: updated consumer laws for the digital economy
The growth of the digital economy – further fuelled by the COVID-19 pandemic – has fundamentally changed UK consumers’ shopping habits: more of us shop online than ever before and the average household now spends over £500 per year on subscription services. However, consumer laws have not kept pace, leaving consumers vulnerable to exploitation.
It therefore came as no surprise that, following several months of public consultation, the UK Government announced wide-ranging reforms to its consumer protection regime on 20 April 2022. As discussed in our client alert , these reforms, once implemented, will be far reaching and will bring the UK more in line with its peer agencies in other advanced consumer protection regimes.
But what does this mean in practice for businesses and consumers? In this post, we take a look at the Government’s proposals to tackle two specific exploitative practices: so-called “subscription traps” and “fake reviews”.
What are subscriptions?
Subscriptions provide consumers with a product or service in return for a periodic, recurring fee. These are now a common part of modern life, be it to access on-demand streaming services, or for weekly food preparation kits. And they have been growing too: access to on-demand video subscription services has grown on average by 10.5% per year between 2019 and 2021.
How can they be harmful?
An estimated £1.8 billion per year is spent by consumers on subscriptions that they consider to be poor value for money, with the average UK household paying £60 a year on unwanted subscriptions. This is often the result of free trials, automatic renewals and/or long roll-over periods. Whilst these are not necessarily problematic in themselves, there is scope for consumers to be taken advantage of by inadvertently getting “locked in” – herein lies the subscription “trap”.
What is proposed?
The Government’s proposed reforms aim to call time on these traps at three key stages:
- Pre-subscription: Businesses will need to provide clearer information to consumers about the subscription before they subscribe. The information will need to be sufficiently clear to enable consumers to make an informed decision when signing up.
- During subscription: Businesses will need to send clear reminders before a contract auto-renews. The reminder will need to specify that the subscription will carry onto a new term unless proactively cancelled. Similarly, the requirement to issue a reminder will apply to free trials or low-cost introductory offers coming to an end.
- Cancelling subscriptions: Businesses will need to provide customers with a straightforward, cost-effective and timely mechanism to exit a subscription contract.
What are fake reviews?
Genuine reviews are provided by consumers without pressure or incentive to provide a specific perspective. However, shoppers are frequently exposed to “fake” or “misleading” reviews which do not reflect an actual consumer’s genuine experience of a good or service. These include reviews endorsed (whether commissioned or otherwise incentivised) by businesses but not labelled as such.
How are they harmful?
These reviews are misleading to consumers and can lead them to make purchasing decisions they would not otherwise have made, essentially based on falsehoods. In turn, this has the potential to hit consumers’ pockets – indeed, it is estimated that the average UK household spends £900 per year after being influenced by online reviews.
What is proposed?
Tackling fake reviews has long been on the Government’s radar. In 2020, the CMA launched an investigation to consider how websites detect, investigate and respond to fake and misleading reviews, including instances where reviews were incentivised. Now, the Government is proposing to simplify the law by rendering such practices automatically unlawful. Specifically, it is proposing to do so by adding fake reviews to the list of “automatically unfair practices” under the Consumer Protection from Unfair Trading Regulations 2008 (known as the “CPRs”). The Government will therefore consult on prohibiting the following practices under the CPRs:
- Commissioning or incentivising: Businesses commissioning or incentivising (whether financially or otherwise) any person to write and/or submit fake reviews.
- Hosting: Businesses hosting reviews on their websites without taking reasonable and proportionate steps to check that they are genuine.
- Offering or advertising: Businesses offering or advertising to submit, commission or facilitate fake reviews.
What comes next?
Whilst these proposals pave the way for stricter enforcement of consumer rights in the UK, they are still proposals and we await the terms of draft legislation, which is unlikely to come into force before late 2023. In any event, subscription providers and online businesses will need to watch this space: comprehensive compliance reviews of their online practices will no doubt be necessary, including the way in which they communicate with customers and advertise their products.