Online sales under the spotlight – CMA sets out consumer compliance and enforcement outlook

Ahead of the consumer protection provisions in the Digital Markets Competition and Consumers Act 2024 (DMCC) coming into force on 6 April, this week, the Competition and Markets Authority (CMA) has set out in a written update, and in a techUK speech provided by CEO Sarah Cardell, what tech businesses can expect over coming months as the new consumer regime comes into force, including a birds-eye view on enforcement priorities and a strong emphasis on facilitating compliance as opposed to aggressively pursuing enforcement action.

Approaching compliance – priorities for businesses

In response to stakeholder engagement in recent consumer consultations, the CMA has confirmed that it will take a staggered approach to providing guidance on, and enforcing, drip pricing. There will also be something of a grace period for enforcement against fake reviews to allow businesses more time to update compliance protocols and, importantly, the technology which facilitates compliance (especially as concerns fake reviews).

• Drip pricing – this is the area where the CMA has received most engagement as part of its consumer consultation process and businesses are generally asking for greater clarity from the CMA. Whilst the CMA has generally maintained a position that a ‘one size fits all’ approach is not suitable for businesses, and has therefore avoided presenting businesses with prescriptive requirements as to how online choice architecture (OCA) should be structured to comply with the new rules on drip pricing, the CMA proposes an iterative approach to enforcement of drip pricing to (i) provide a clear framework for compliance with aspects of the law on drip pricing that are well understood and largely unchanged, in April and (ii) consult on aspects of drip pricing which have created more uncertainty (i.e. fixed-term periodic contracts), over the summer, with a view to publishing further guidance in the autumn. Enforcement action will only be taken against practices which clearly breach the rules outlined in the April guidance.
   
• Fake reviews – to allow businesses to bed in changes to online and legal compliance programmes, for the first three months of the new consumer enforcement regime, the CMA will focus on supporting businesses with their compliance efforts concerning banned practices in relation to fake consumer reviews, rather than enforcement. The new rules require considerable scrutiny of reviews on review platforms, retail websites, and sites which refer to reviews on third party platforms. The delay in enforcement is an acknowledgement from the CMA that most businesses do not yet have the technological infrastructure and expertise in place to comply with the new obligations on fake reviews.  

Enforcement priorities

The CMA has announced that it will focus on enforcing against the most egregious harms, including: aggressive sales practices that prey on vulnerability, providing information to consumers that is objectively false, contract terms that are very obviously imbalanced and unfair, behaviour where the CMA has already put down a clear marker through its previous enforcement work, and banned practices (ie. practices that are always unfair). In practice, this is likely to mean continued scrutiny of OCA and a need to substantiate pricing, urgency, and green claims across online platforms/applications.

The CMA has clarified its commitment to “support the vast majority of well-intentioned businesses who want to do the right thing but may be unclear on exactly what is needed to ensure compliance” especially where rules have changed and/or there is less clear-cut precedent and has also announced that it will “take into account where businesses have taken proactive steps to correct infringing conduct, in deciding the appropriate level of a penalty”.

Remember, remember, the 6^th of April

The CMA has promised greater clarity for businesses ahead of commencement. It will publish an approach document on how it will implement its consumer enforcement regime in line with overarching principles (we would anticipate something similar to that which has already been published for mergers) as well as final versions of the unfair commercial practices, procedural, and consumer protection regime guidance documents, each of which the CMA has already consulted on before 6 April. 

By signalling as loudly as possible its intention over the short-to-medium term to promote compliance rather than enforcement, the CMA is playing “good cop” with its new enhanced enforcement powers and indicating the regime will kick-start in a more discursive, collaborative vein than observers may have anticipated six months ago, taking account of the challenges businesses face to comply with the DMCC, such as the need to update online platforms and integrate new technologies (e.g. to comply with the rules on fake reviews). 

Watch this space as we provide you a further update on what the finalised guidance and approach documents mean for businesses, once they are published in less than a month’s time.