Corporate and Commercial
Ewan Ooi
February 2025
- The Digital Markets, Competition and Consumers Act (DMCCA) mandates greater transparency in digital transactions, aiming to eliminate deceptive practices that harm consumers.
- The Competition Markets Authority (CMA) has gained new power to directly enforce consumer protection laws without court intervention which includes issuing fines and taking corrective actions against businesses that violate the DMCCA.
- Businesses must enhance their compliance efforts to adapt to the new regulations.
Key changes
- Subscription services
Businesses must provide clear information about subscription terms, including costs and cancellation procedures. Automatic renewals must be communicated transparently, and consumers should be able to cancel subscriptions easily. The pre-contract information must be given together, in writing, without the need to click links or download.
In addition, a 14-day cooling off period must be provided to consumers and consumers must have the ability to easily exit the contract with a single communication.
The new regime for subscription contracts will not come into force until April 2026.
- Fake reviews
Under the DMCCA, businesses must not publish or commission the publication of fake reviews which are designed to mislead consumers. The DMCCA also puts an obligation on businesses to take reasonable and proportionate steps to prevent the publication of fake reviews.
- Hidden fees
All charges must be disclosed upfront in the invitation to purchase (i.e. adverts or listings), including any fees, taxes and charges. Businesses can no longer add unexpected fees at the final stages of a transaction. If the whole price cannot be ascertained, then the method of calculation must be stated in the invitation to purchase.
How does it affect businesses?
- Businesses will need to update their systems to comply with these updated transparency requirements, which could potentially involve significant changes to their terms of business, website and customer service.
- Failure to take reasonable and proportionate steps to prevent the publication of fake reviews may leave businesses open to fines and penalties from the Competition and Markets Authority.
- Marketing teams must be vigilant in creating and reviewing advertising content to ensure it meets the new standards and to ensure that all promotional materials are truthful and not deceptive.
Enforcement by the CMA
The CMA’s will be granted a new power to directly enforce consumer protection laws without court intervention, unlike the Financial Conduct Authority (‘FCA’). This includes issuing fines and taking corrective actions against businesses that violate the DMCCA. In addition, the CMA can consider both regulated and unregulated businesses, unlike the FCA.
Key changes:
- Direct Enforcement
The CMA can now issue infringement notices and impose fines of up to 10% of a company’s global turnover or up to £300,000 (whichever is greater) for non-compliance.
- Corrective Actions
The CMA can mandate corrective actions, such as refunds to consumers or changes in business practices. Fines may also be issued for failure to cooperate with CMA investigations.
How does it affect businesses?
- Businesses must adopt a proactive approach to compliance, regularly auditing their practices to ensure they meet the new standards.
- Businesses should develop robust risk management strategies to handle potential CMA investigations and enforcement actions.
Conclusion
The DMCCA has brought significant updates to consumer law, emphasizing transparency, fairness, and direct enforcement. Recent news and governmental consultations regarding new measures to tackle unfair and costly subscription traps suggest that the CMA will not be shy to exert their new powers. For businesses, this means adapting to new regulations, enhancing compliance efforts, and ensuring that consumer interactions are fair and transparent.
