These changes would significantly strengthen consumer protections and have direct consequences for businesses, their boards and individual directors.
In April 2018, the Secretary of State for Business, Energy and Industrial Strategy (BEIS) published the ‘Modernising consumer markets: green paper’. The paper identified that technology has changed (and continues to change) the consumer market: the digital age has brought consumers more choice but has also created new ways to treat them unfairly. The paper also discussed what it means to be a ‘vulnerable’ consumer, where individuals are unlikely to exercise their rights and switch providers when it comes to subscription services and utilities.
Building on the 2018 green paper, the CMA has¹ set out its recommendations, which are intended to enhance consumer protection and, in turn, improve public confidence in markets. The letter identifies some of the CMA’s current challenges;
In short, the CMA operates on a macro level, and this makes it difficult to enforce consumer protection in a meaningful way: “Many firms are prepared to risk breaking the law, there may often be no business case for compliance.”²
Proposed changes
To ensure that it pays for businesses to do the right thing, and to prevent anti-competitive or unfair trading practices, the CMA proposes the following:
The courts do generally treat consumers with greater sympathy than they are willing to grant commercial businesses, particularly when it comes to assessing ‘fair business practices’. However, putting this general principle on a statutory footing and declaring the consumers’ interests must be “paramount” in the eyes of the Court, would significantly shift the economic and legal interests of consumers and businesses. Without careful consideration and drafting, such a duty could bring legal weight to the phrase 'the customer is always right'.
Firms would be expected to appoint an individual for assessing and reporting on competition and consumer law compliance, as well as ensuring auditors address these issues directly. The Government has already proposed to introduce legislation to give the courts the power to impose civil fines up to 10% of global turnover for breaches of consumer law³, but the enhanced duties on boards and individuals could also see the CMA disqualifying directors for serious infringements.
There are also greater protections proposed for whistle-blowers and a discussion around the merger landscape post-Brexit. Businesses would find it much more difficult to disregard the CMA’s recommendations or guidance where the CMA has determined that a certain practice is illegal, and the CMA’s conclusions would be treated as a finding of fact, unless their findings are subject to appeal. In a world of data mining, personalised pricing and where internet access is key to ensuring individuals have the skills, confidence and time to trade, these proposals demonstrate a huge shift in favour of consumers.
Whilst it remains to be seen how the Government will respond to the proposals, businesses that sell goods and/or services to consumers should prepare for a new legal landscape that requires them to take a more active role in safeguarding consumers’ interests, and consider whether their current practices are at least up-to-date with current requirements.
For more information, please contact Emma Watt.
Citations:
1. Through a letter from Andrew Tyrie, CMA Chair to BEIS, dated 21 February 2019.
2. Page 20 of the CMA’s letter dated 21 February 2019.
3. BEIS, Modernising Consumer Markets – Consumer Green Paper, April 2018, page 57.
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