Call for evidence on new B2C terms and conditions rules and fines: have your say by 25 April

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

How consumer-friendly are your T&Cs? Would the key terms fit onto a smart phone screen? How would it impact your site design if you were obliged to have T&Cs presented to consumers mid-transaction? Do you actively encourage customers to read your T&Cs or do you bury them away in small print? These are some of the potentially significant changes being put forward by the Department for Business, Innovation & Skills (BIS) in its call for evidence released on 1 March.

How would these proposals affect your business?

The document outlines plans for (1) additional rules to make Terms and Conditions (T&Cs) more accessible for consumers and (2) as yet unspecified fines for unfair terms and other consumer law breaches. The proposals suggested by the government may even result in the recently-implemented Consumer Rights Act 2015 undergoing amendments. The proposals would affect all businesses selling goods, services or digital content to consumers, but with a particular focus on businesses not already subject to sector specific regulation.

Businesses should view this as an opportunity to influence any further strengthening of consumer protection rules and sanctions. Organisations have until 25 April 2016 to respond to the consultation. If the proposals are implemented, all B2C business, even those whose T&Cs meet current standards on transparency and fairness, will need to review and update their terms and review site design and transaction paths.

We've only just had the Consumer Rights Act - why is the government proposing more changes now?

Traders are already under an obligation to ensure that consumer terms are clear, prominent and written in plain English, and to avoid terms which are unfair to the consumer. These rules have been in force for over 20 years, and were recently updated under the Consumer Rights Act 2015 – so why the new proposals?

The changes are being proposed because the government believes that T&Cs are currently too lengthy, making it very difficult for consumers to fully understand their impact. The paper cites a recent government survey, which has suggested that over 60% of people almost never look at T&Cs.

On the issue of enforcement powers, as we reported in our recent consumer round up here, BIS has previously floated the idea of fines, suggesting that civil enforcement is currently limited in its scope and does not provide sufficient sanction or punishment for detriment caused to consumers, meaning there is a lack of incentive for businesses to change their practices.

What changes are being proposed to the way to T&Cs are presented?

The government's aim is to help businesses engage with consumers more effectively, making T&Cs genuinely accessible and giving consumers the confidence to challenge terms with which they are uncomfortable. While responsible brands are unlikely to have an issue with making their terms transparent and user-friendly, encouraging consumers to challenge those terms is unlikely to be popular!

The specific measures suggested by BIS to achieve this transparency include:

• presenting all key terms in T&Cs “bold and upfront” so consumers are unlikely to miss them;
• using tick boxes only for agreeing to something and not for opting out;
• making consumers aware of any product hardware/software restrictions at the time of purchase (e.g. mobile phones which are locked to a specific network);
• incentivising businesses to encourage their consumers to read their T&Cs;
• encouraging businesses to compete in making their T&Cs as user-friendly as possible;
• providing a clear track of changes when businesses have updated their T&Cs;
• giving greater transparency on how consumers’ personal data is used; and
• providing the true cost of monthly contracts which have varying prices (e.g. giving average contract prices where contracts are discounted for the first few months).

What new enforcement powers are being proposed? How much could we be fined?

The government has proposed introducing monetary penalties for breaches of consumer legislation to ensure more visible consequences for businesses that do not comply with consumer law and provide a stronger deterrence against future breaches. The government is seeking views on how these fines should be imposed – whether through the civil courts or by enforcement bodies, such as the Competition and Markets Authority (CMA) and other national regulators (such as Ofcom, Ofgem and the Financial Conduct Authority).

Although BIS does not expressly set out the proposed range of such penalties, it does make references to the Dutch Authority for Consumers and Markets, which can impose fines of up to 450,000 EUR (approximately £350,000) per breach and the Italian Competition Authority, which can impose fines of up to 5,000,000 EUR (approximately £4,000,000) against unfair terms or misleading business practices. This may serve as an indicator as to what the governmental has in mind and, in that case, means any fines eventually imposed could be quite significant.

Comment and practical next steps

For many responsible brands, compliance with consumer protection rules and providing clear and user-friendly T&Cs is already the norm. However, if the government implements these additional rules on transparency and presentation, all B2C businesses will need to re- review both the content of their terms and the way these appear during the order process – which could involve site design changes.

Some companies already manage to convey legal T&Cs in plain English and in a tone which is "on brand" for their wider customer communications. However, there are still too many B2C traders who revert to lengthy legalese more suited to a commercial contract.

The amount of work involved for businesses to ensure that their T&Cs are compliant and sufficiently comprehensible to consumers under any revised rules will depend on how compliant they are with the current rules.

In terms of sanctions, the risk of fines would no doubt focus the minds of some businesses to pay more attention to consumer compliance. The CMA and other regulators to date have been able to “name and shame” non-compliant businesses, typically by informal negotiation and then by announcing that the business has agreed to change its practices or has given undertakings to amend its terms and conditions. Arguably for most businesses, (and a number of household names have been caught out in this way), being in the news for the wrong reasons is punishment enough. The prospect of receiving a potentially hefty fine and then being in the news because of it, has the potential to cause even more serious reputational damage.

B2C business should:

• respond to the questions posed in the Call For Evidence by the 25 April deadline if they wish to influence any changes to current rules. To respond online see this link
• review their T&Cs in any event, both for succinctness, readability and potentially unfair terms
• give the board and the marketing department a heads up that changes to the online order process could be required in due course, depending on the outcome of the proposals.

If you would like to discuss the Call for Evidence, the impact of government's proposals on your business, or other aspects of consumer law, please contact Olswang Senior Associate Anna Soilleux.