The battle to better protect consumers online rages on

The UK Government has this month launched a consultation on improving transparency and product information for consumers. The consultation indicates the direction UK enforcers are heading even before getting their new consumer protection powers under the draft Digital Markets, Competition and Consumer Bill (DMCC) which we expect to come into force next year (see our posts). Of particular relevance to tech businesses is further clarity in relation to fake reviews, obligations on online platforms and the need for clear information and price transparency which will apply to all those who sell online.

The consultation closes on 15 October, if you would like to discuss putting in a response, please do get in touch.

Fake reviews

According to government research, an estimated 11-15% of reviews on the UK’s most popular sites are fake, and not only do studies indicate that consumers are poor at identifying fake reviews, but that they are 3.1% more likely to purchase products when exposed to fake reviews. Government estimates consumer detriment as between £51 and 313 million.

The DMCC indicated that fake reviews, defined as those that purport to but don’t represent a genuine customer experience, are firmly in the sights of regulators. The current consultation sheds some light on how Government will put the stated policy objective into action. The Government is proposing that certain practices will be considered automatically unfair in all circumstances:

• Submitting a fake review, or commissioning or incentivising any person to write and/or submit a fake review of products or traders.
• Offering or advertising to submit, commission or facilitate a fake review.
• Misrepresenting reviews, or publishing or providing access to reviews of products and/or traders without:
  • taking reasonable and proportionate steps to remove and prevent consumers from encountering fake reviews; and
  • taking reasonable and proportionate steps to prevent any other information presented on the platform that is determined or influenced by reviews from being false or in any way capable of misleading consumers.

Businesses will be obliged to take “reasonable and proportionate steps” to ensure that they are not acting unfairly. This would suggest that any business that hosts reviews would need to have processes in place to identify suspicious reviews (including those generated by artificial intelligence), remove those found to be fake and sanction anyone found to have commissioned or posted fake reviews, on an individual basis, or through AI, as well as put in place reporting mechanisms to enable customers to flag suspicious reviews. 

The proposal envisages that further guidance for businesses would be provided as to what would amount to “reasonable and proportionate steps”.

The proposals, if adopted, would allow enforcers such as the UK Competition and Markets Authority to take action more quickly to tackle fake reviews. And once the CMA get their enhanced fining powers under the DMCC (which will allow it to fine businesses that breach consumer protection rules up to 10% of their global turnover) this could have significant financial consequences for those found in breach. 

The Government is also consulting on whether to expand the liability for fake reviews to include not only civil liability but also criminal liability.

Online platforms’ responsibilities to consumers (platform duty)

Platforms find themselves consistently under scrutiny in many areas of regulation, including consumer protection. Conscious of the increase in online shopping, especially through online market places and other interactions with digital platforms including promotions through social media, the Government is consulting on whether consumer obligations provide adequate protection for online shoppers. 

Existing laws already impose duties on online platforms to protect consumers, including where supplying or promoting another trader’s products to consumers (which would catch online market places). These duties include a requirement to act with reasonable skill and care and in accordance with the general principle of good faith. The Government proposes to provide guidance on exactly how online platforms can comply with these obligations.

Whilst guidance in this area may provide welcome clarity, particularly in light of higher enforcement risk when the DMCC comes into force, it will need to tread a careful line between providing a guide for fair dealing with consumers and hindering innovation in evolving markets.

Display of pricing information 

Given the current cost of living crisis, the CMA’s current work investigating consumer harms in competition, choice and rising prices in groceries, as well as unit pricing has been one of the most prominent consumer protection mandates over recent months. 

The Government is now seeking views on its proposal (which reflects the CMA’s recommendations) to refresh retailers’ current obligations under the Price Marking Order 2004 (PMO), concerning the consistency of unit pricing, the legibility and transparency of prices (including where there may be multi-buy or loyalty discounts) and considering the scope of the PMO and whether it should be extended to apply to smaller retailers.

Drip pricing / hidden fees

Drip pricing is the process by which the headline price advertised has increased by the time a customer comes to check-out as a result of optional extras, additional fees and other charges. The Government is concerned that this reduces price transparency and makes it harder for consumers to make informed decisions.

The Government Consultation makes very few concrete proposals in relation to drip pricing, instead asks for views on whether the current law, notably on misleading actions and omissions, protects consumers from detriment caused by drip pricing and seeks views on whether the rules need to be better explained or reformed in order to protect consumers. The consultation also seeks views on whether different rules should apply to mandatory fixed fees, mandatory variable fees and optional dripped fees.

The consultation suggests that more guidance, and potentially further regulation to put flesh on the bones of the DMCC, are in the pipeline.