Introduction
As everyone here will know, now is a pivotal time in consumer enforcement with direct enforcement. Today I want to talk about how we at the CMA are implementing our consumer protection work under the Digital Markets, Competition and Consumer Act (DMCCA).
This is a time of change and that’s exciting, including for me personally, as I take on the leadership of our consumer function. But importantly, what hasn’t changed is the CMA’s purpose, and our statutory mandate to promote competition and protect consumers.
Those fundamentals remain. The protection of consumers – people – in the UK underpins everything that we do. The consumer welfare standard is central to competition policy and with the changes brought in by the DMCCA we have the opportunity to do our consumer protection work more effectively, more quickly and – hopefully – with even better outcomes for people in the UK.
In its steer the government emphasised the importance of the CMA using its consumer enforcement powers under the DMCCA. And, in particular, that the CMA should use its consumer enforcement functions to help to support economic growth and investment.
The CMA’s ambition for consumer protection
The CMA’s ambition is an effective and independent consumer protection regime, which safeguards UK consumer interests and gives people the confidence they need that the CMA is standing up for them.
An effective consumer protection regime should also give fair dealing businesses the confidence to grow and invest on a level playing-field, knowing that their competitors cannot gain an unfair advantage by breaking the law.
We, together with other regulators, have been called upon to support the government’s push to unlock barriers to growth. Growth which will improve quality of life and ultimately support long-term prosperity for everyone in the UK.
To me, it is absolutely clear that free and fair competition and effective consumer protection support growth. And consumer protection does this in two ways.
First, enforcing consumer protection law protects people from harmful and unfair treatment. Protected consumers are confident consumers. When consumers are confident about spending money, markets thrive. Consumers need clear, accurate information about price and the other key features of products and services they buy so they can shop confidently and find the best deal for them. They need to be able to trust reviews of products on which they rely. They shouldn’t be misled into paying for goods or services they don’t want or would not choose if they had the full picture. And they need to be able to exercise their legal rights when things go wrong – when something they buy online doesn’t look how they expect or when goods or services simply are not fit for purpose.
Second, consumer protection supports growth when it levels the playing field on which businesses compete. Businesses can compete vigorously on the prices and quality of their products and services confident that their competitors are playing by the same rules and can’t gain an advantage by breaking the law. That way, businesses are incentivised to become more productive and innovative, rather than relying on unfair practices. As with competition enforcement, business and investor confidence in the level playing field is strengthened, with wider benefits across the economy.
Priorities in our first 12 months of direct enforcement
With that ambition in mind, the CMA has 2 core priorities over the next 12 months. First to support compliance and help businesses to do the right thing. And second, to take action to protect consumers from harm where we see egregious breaches of the law.
On compliance, we will be continuing our extensive engagement with stakeholders across the business and advisory community as well as with consumer groups and other enforcers. We want to continue the dialogue that we have been building with business including through the CMA’s new Growth and Investment Council.
And we also want to make clear that we have listened to and acted upon the feedback we have received so far. In our consultation process, we heard that our guidance was overly long and too complex – making it difficult for non-lawyers to understand. So, we responded. Our unfair commercial practices guidance includes over 50 examples of how the law will apply in real life scenarios. And we published shorter, more digestible guides for businesses on unfair commercial practices and fake reviews.
Now, we are looking for views on how to further develop our guidance. We want to hear from you about the areas where you – or your clients – are still unclear about how to comply with consumer law. Where is there a need for further clarity? Where is there a need for greater predictability on how the CMA will take enforcement action? We want to hear from you and we will take these views into account when deciding which areas to prioritise because it is in everyone’s interests for businesses to get it right. When businesses comply, everyone benefits.
In terms of our priorities for the first 12 months our early enforcement action is likely to focus on more egregious practices where the law is clear. We have set out examples in our approach document, so that businesses have transparency on how the CMA intends to operate in the early days. We will focus on the more serious cases of consumer harm, for example:
- aggressive sales practices that prey on consumers especially those in vulnerable position
- where information has been provided to consumers that is objectively false
- where contract terms are in place that are clearly imbalanced and unfair
In choosing which cases to pursue, we will continue to apply our public prioritisation principles – looking at whether we are best placed, whether we can be effective and really shift behaviour to create better outcomes for consumers.
We will also continue to focus on areas of essential spend, to help people struggling with pressure on household budget. It’s always important that consumers are protected, but even more so when they have no choice but to engage with particular sectors. Our recent work in essential spend sectors includes heating, groceries and housing. We will be listening to what consumers say – including by engaging closely with consumer groups – to ensure we tackle issues the most important issues that matter to real people.
New cases may well come out of the monitoring work we have been carrying out in the past few months. We have been monitoring business compliance with the new DMCCA provisions. It’s really positive to see that a number of businesses have changed their practices in response to the new regime coming into force. For those that haven’t changed their practices yet,we are continuing to monitor, and we will be making decisions about the cases which we will prioritise over the coming weeks.
Approach to price transparency and fake reviews
I wanted to talk briefly about the two main areas of change to substantive consumer law – the changes to the law on price transparency (or drip pricing) and the law on fake reviews.
Price transparency
On price transparency, section 230 of the DMCCA tells us that certain information has to be included in an invitation to purchase, including information about the total price of a product, which includes mandatory taxes, charges and other payments which the consumer will necessarily incur.
This provision has the effect of prohibiting drip pricing, which is where customers see a headline price and then, as they go through the transaction process, additional charges are added on, which means the final price ends up looking quite different to the advertised price. Government has published research estimating these unavoidable fees cost consumers £2.2 billion a year. It can also harm businesses that compete with a business that is drip pricing, because we know customers put a lot of weight on headline prices and so a business that complies with the law and presents a more expensive upfront price, may get fewer click throughs that one that conceals additional mandatory fees. We don’t think this is fair.
In our initial draft of the unfair commercial practices guidance, we set out guidance on how businesses could think about the requirement and could think about whether fees are mandatory or optional. We also provided guidance on particular types of contract such as fixed term monthly contracts.
We’ve received a lot of very helpful feedback from stakeholders who have asked questions about how this will work, often in an industry specific way, and who have suggested that some of the points we made in the guidance could result in unintended consequences. We want to reflect really carefully on how to answer those questions, on whether there are other ways to do things and to think about how to provide really clear guidance – noting of course that our remit covers all sectors across the economy.
For this reason, we have adopted a phased approach to the guidance. So what is set out in the recently published unfair commercial practices guidance is a slimmed down version of what the original draft provided, focusing on the core of drip pricing – untrailed, unexpected charges through the purchase process.
We will reflect on the feedback on some of the other aspects trailed in the draft Guidance and plan to re-consult on these in the summer, with new finalised guidance expected in the autumn. And we won’t take any enforcement cases on issues to be covered in this later guidance until it is published in its finalised form.
To round up on drip pricing, we were monitoring the pricing practices of a number of businesses as the DMCCA came into force. I am really pleased to say that many of the most serious and harmful examples of drip pricing were changed at the beginning of this month. This is a great outcome for consumers who will no longer be misled into clicking on a headline price that isn’t what they will ultimately pay. And it is also a great outcome for competitors of those businesses who can now compete fairly on price/on a LPF. But not all businesses have changed their practices and of those that did change their practices, not all will have come far enough so we are continuing to look at pricing practices across the economy, and where we have concerns about compliance, businesses can expect to hear from us.
Fake reviews
Turning now to fake reviews, which are covered in a new banned practice introduced in the DMCCA. Various practices involved in the supply chain for fake reviews are now prohibited including, creating reviews that conceal the fact they have been incentivised, and publishing reviews in a misleading way. It also imposes a duty on anyone who publishes reviews or review information to take effective steps to prevent and remove from publication fake and concealed incentivised reviews and false or misleading review information.
This is a new banned practice – but it is worth noting the CMA has been active in this space for a while. You may have seen that the CMA recently agreed undertakings with Google relating to its reviews practices and has an open investigation into Amazon. That followed undertakings signed with Facebook and eBay in relation to the sale of fake reviews on those platforms. And the CMA has previously taken action against sixteen influencers for not labelling endorsements as advertisements on social media, as well as the Instagram platform for not doing enough to tackle these practices on its platforms.
Although we could already, and have already, tackled fake reviews under our existing powers, we recognise that the new provisions create very specific obligations on businesses that need to be operationalised and these may require changes to systems and compliance programmes.
During our engagement with stakeholders, we have heard that businesses need time to bed these in, and so for the first 3 months of the new regime we will focus primarily on supporting businesses with their compliance efforts rather than taking enforcement action straight out the gates.
But that is, of course, not to say that we won’t be doing anything until July. Our fake reviews enforcement strategy mirrors the new banned practice. We are looking across the fake reviews value chain and thinking about when and how to take enforcement action all across it. We are using the most up to date tech to help us to identify potential infringements at scale. We know customers rely on review data when taking decisions about which products to buy and the law now gives us the tools to hold to account those that fail to comply.
Implementing the 4Ps
I will now talk about a bit about the how – how we intend to use our DMCCA powers. You may have heard that the CMA has recently introduced ‘the 4Ps’ – a programme of meaningful changes to how the CMA will go about all our work, including consumer protection focusing on delivering good processes at pace, proportionately and predictability. The 4Ps framework reflects feedback we sought and heard clearly from businesses and investors, as well as themes from the draft government steer.
The 4Ps will enable businesses and investors to have confidence in UK’s competition and consumer protection regimes, providing a regulatory environment which is conducive to growth.
Pace
The CMA is committed to reaching decisions under its consumer enforcement regime as swiftly as possible – we aim to bring consumer harm to an end quickly and secure redress for consumers where appropriate. Of course, we must ensure decisions are robust, that processes are fair and that we respect the rights of defense of those we investigate.
To achieve this – first – we plan to publish timetables at the outset of investigations, so businesses are clear on what to expect and when. Our new case management system means that we will be able to administer cases more efficiently. We will use our information gathering powers in a targeted way, minimising the burden for businesses wherever possible whilst also being mindful of the need for our teams to have a full understanding of the conduct we are investigating and the context in which that takes place.
Where we can, we will seek to streamline cases, focusing on the most important areas of concern and dropping less important areas quickly. We will seek early resolution of cases where it is appropriate to do so through settlement.
Pace is a two-way street: we expect businesses and their advisers to play their part in progressing cases at pace. Parties will be expected to respond to information notices fully and on time, to work with us constructively and identify where there are issues they can be resolved or agreed early in the process.
Predictability
Core to predictability is our focus on helping businesses comply, in part by issuing further guidance that I have already spoken about. We know that at the start of a new regime there is an inherent level of uncertainty and we have worked hard to set out how we expect the regime to operate going forward. We are committing to communicating with businesses fairly and openly during the course of investigations. And as time progresses, businesses will be able to rely on the CMA’s precedent decisions to predict how consumer law could apply to different scenarios.
We are also exploring further ways to give businesses clarity on conduct which does not infringe the law, in particular, in areas where there is no legal precedent. And we are exploring new opportunities for businesses to seek advice for conduct they are considering introducing.
Proportionality
The burden of following the rules must be proportionate especially for small businesses. We recognise that businesses need time to review their compliance activities – our early enforcement action will focus on more egregious conduct and conduct where businesses should already be clear about their legal obligations as there is a clear marker in guidance or past cases.
The CMA will prioritise consumer redress, recognising that our primary focus is on stopping consumer harm. In determining the level of any penalty, we will take account of proactive steps businesses have taken to correct wrongdoing. We will also invest in monitoring the effectiveness of all our remedies, to ensure that where we do take action, it has the impact we hope to achieve.
Process
Finally the CMA intends to implement a process which works for all businesses, large and small, constructively and collaboratively. For that reason the CMA has consulted on its guidance extensively, both through formal consultations and business roundtables.
In terms of engagement throughout the lifetime of a case, the CMA’s direct enforcement process, has a lot of parallels with the competition process – and so businesses and their advisors can expect similar opportunities to engage on a case.
Leveraging the CMA’s expertise
Finally, I wanted to talk briefly about an important topic which will be discussed later in one of the panel sessions later this afternoon including my colleague Karen Croxson, our Chief Data, Technology and Insight Officer. How at the CMA we intend to use the full range of our tools, including our in-house digital, data, technological and behavioural expertise.
Our data team provide invaluable input to our consumer function across the life cycle of our cases. From helping us draw on the very latest technology to identify at scale traders that may be infringing the law; to informing our prioritisation decisions; to gathering evidence, simulating consumer journeys to an evidential standard; evaluating evidence submitted by parties, and then all the way through to supporting our case teams with design and evaluation of potential remedies. We work closely with our DTI team and will continue to do so even more closely as we move into a direct enforcement model.
Of course, whether a commercial practice or contract term is illegal is, ultimately, a legal question. Exactly what types of evidence will be needed to prove an infringement will vary case by case. Behavioural evidence can shine a light on how consumers respond, but it won’t always be necessary or proportionate to undertake extensive complex analysis.
The expertise of the data team is also incredibly valuable in informing our work in supporting compliance including through guidance and principles we publish for businesses. The team provided extensive input into our discount and reference pricing principles in the mattress sector and in other papers and research published by the CMA – for example our Online Choice Architecture evidence review.
I’m looking forward to hearing more on this topic in the panel discussion later this afternoon.
I would like to finish by re-emphasising the role an effective CMA consumer enforcement function has in today’s world. Effective, proportionate consumer protection will protect and safeguard UK consumer interests and should give UK consumers the confidence they need that the CMA is standing up for them. And when consumers are confident about spending their money, markets thrive.
An effective consumer protection regime should also give fair dealing businesses the confidence to grow and invest on a level playing-field, knowing that their competitors cannot gain an unfair advantage by breaking the law.
Reflecting the strategic steer from government, the CMA will use its new powers to properly and independently exercise our statutory function of consumer protection – promoting consumer trust and confidence and deterring poor corporate practices. I am confident this approach will deliver robust protections for consumers and support economic growth.
Thank you very much for listening.