2021 promises to be a busy year for the Competition and Markets Authority’s (CMA) consumer protection work. New investigations and potential new powers should mean that consumer protection is at the top of every business’ compliance agenda.
The CMA has launched its draft Annual Plan for 2021/22, which includes its consumer law enforcement priorities over the coming year.
The CMA’s targets build on a year of robust consumer protection enforcement activity during 2020, which has seen the CMA tackle a wide variety of cases from holiday and wedding cancellations due to COVID-19, to its continued work against auto-roll over contracts and increased prices for ‘loyal’ customers, for example in relation to anti-virus software.
Over the next 12 months, the CMA plans to continue this work in line with the following themes:
- Protecting consumers and driving recovery during and after the coronavirus pandemic;
- Fostering effective and informed consumer choice in particular in relation to online advertising and claims related to environmental benefits; and
- Building a world leading enforcement regime post-Brexit (which could include significant new powers to fine infringing companies).
Consumer protection is therefore firmly on the CMA’s enforcement agenda for 2021.
Protecting consumers after COVID-19
Helping consumers is central to the CMA’s mission in the wake of the coronavirus pandemic.
The CMA’s COVID-19 Taskforce has received large numbers of complaints from consumers about the failure of companies to respect consumers’ refund rights following travel, holiday lettings and wedding cancellations.
The CMA has promised to continue to respond swiftly to such harmful practices and renewed its calls for greater consumer law powers, including increased powers to tackle ‘price gouging’ (which is where businesses suddenly increase the price of a product in response to increased demand, for example, for hand sanitiser during the COVID-19 pandemic) and the ability to impose fines for consumer law breaches.
Businesses need to be mindful of their responsibilities to treat consumers fairly, even during challenging times.
The CMA will also focus on the ability of consumers to make well-informed choices when purchasing products and services online.
Recent investigations by the CMA relate to businesses providing misleading information in connection with online gaming, online product reviews and endorsements, event ticketing and hotel bookings.
These cases established that online platforms have a responsibility to organise themselves in a way to minimise the risk of consumer protection breaches (either by themselves or by third party users), by using templates and mandatory questions, actively monitoring use and being pro-active to remove products and posts which do not comply with consumer protection requirements.
The CMA has also highlighted that brand owners must have clear compliance procedures in place in order to ensure that all online advising through third parties (such as social media platforms or online influencers) follows advertising and consumer protection rules, including clearly disclosing their relationship with a brand and explaining the consequences of failing to do so. Companies should also be wary of offering any kind of incentives in exchange for ‘reviews’ on products purchased by consumers, as any incentive is likely to influence the review which is given.
In June 2020, the UK implemented new rules which enabled the CMA to seek Online Interface Orders from the Court. These Orders can require companies operating ‘online interfaces’ (i.e. websites or apps) to modify or remove content, or display certain notifications or warnings to consumers.
Misleading environmental claims
On 2 November 2020, the CMA launched an investigation into how products and services claiming to be ‘eco-friendly’ are being marketed in the context of a shift towards sustainability considerations of consumers.
The CMA is concerned that increased demand for green products and services may lead to misleading, vague or false ‘green’ claims. This could include exaggerating a positive environmental impact, using complex or jargon-heavy language, or falsely implying that items are eco-friendly through packaging or logos.
Businesses should ensure that they can ‘substantiate’ all eco-friendly claims with detailed evidence before making such statements.
The CMA hopes to produce guidance for businesses on how to be transparent when making ‘green’ claims in order to ensure that consumers are well-informed. This guidance should be consulted when published to avoid making false or misleading environmental claims.
CMA calls for greater consumer law enforcement powers
At the time of writing, the Penrose Review - a review of the competition and consumer regimes in the UK by John Penrose MP, is expected to recommend enhancing the CMA’s powers to investigate and enforce breaches of consumer protection rules following calls by the CMA.
Currently, the CMA aims to secure voluntary undertakings from businesses to address any concerns they have about potential breaches of consumer protection rules and, if these are not forthcoming, must apply for a Court Order to require the changes to be made.
If measures are introduced along the lines of those anticipated, the CMA will have the power to take a formal decision that a business has breached consumer law and to impose significant financial penalties on infringing businesses, potentially also with the power to issue director disqualification orders. This would be a significant ramping up of the CMA’s powers.
Businesses should therefore ensure that consumer protection law compliance is a high priority and appropriate compliance policies are in place.
To find out more about Pinsent Masons and the services they provide to the retail industry, click here.
This article was also published in The Retailer, our quarterly online magazine providing thought-leading insights from BRC experts and Associate Members.