UK Government announces consultation on consumer protection reforms

On 4 September 2023, the Department for Business and Trade launched a consultation (“Consultation”) to assess how to improve price transparency and product information for consumers. Prompted by its ongoing review of retained EU laws post-Brexit and the continued focus on the evolving ways in which businesses are offering goods and services to consumers, the Consultation is designed to assess whether the current rules are still fit for purpose.

The Consultation follows the publication of the highly anticipated Digital Markets, Competition and Consumers Bill (“DMCC”) earlier this year (see our article here), which the Consultation touches on throughout. The Consultation is open to all stakeholders and will affect consumer-facing businesses in a variety of sectors, despite a number of press articles focusing only on one aspect in one sector - the use of “drip-pricing” in the transportation industry.

What are the Government’s objectives? 

The Government’s focus is on how it can improve information transparency for consumers, to ensure they can make informed choices about the products they purchase, from their weekly shop in-store, to booking hotels online. The Government is looking to assess how best to provide consumers with clear, timely and relevant information, particularly in respect of the pricing of products, to empower them to find better deals and products that best suit them. The Consultation also assesses how to increase competition among producers, by ensuring information is provided in a consistent and clear manner.

What is the Government consulting on?

1. The display of pricing information

The Government is seeking views on proposals to reform the Price Marking Order 2004 (“PMO”), which is the current (complex and not fit for purpose) law requiring the display of the price of goods and the unit price (for example, the price per kilo or per litre).

The Consultation refers to an investigation by the Competition and Markets Authority (“CMA”) in July 2023 in which two key issues were identified: (i) inconsistent compliance with the PMO, with some retailers deviating from the required unit of measurement in the unit price (e.g. per 100 grams rather than per kilogram); and (ii) Schedule 1 of the PMO, which sets out exceptions to the units of quantity for certain products, is considered out of date and does not account for changes in the retail industry over the past 20 years. In the Consultation, the Government has further raised concerns that the PMO requirements are not appropriate for certain types of promotions and believes these requirements are unclear and capable of interpretation. These types of promotions include volume pricing (e.g. multibuy discounts) and loyalty pricing (e.g. lower prices for customers who are members of a trader’s loyalty scheme).

The Consultation includes various questions about potential changes to the PMO, particularly in relation to the unit pricing rules and the display of pricing information. The Consultation also seeks feedback on proposals to amend the PMO to include information requirements for deposit return schemes which are set to be introduced in the UK, so that consumers can easily understand how much money they would get back when returning an eligible product.

2. Hidden fees and drip pricing

The Consultation explores the use of so-called “drip pricing”, a practice under the media spotlight where consumers are shown an initial price for a product, with additional (mandatory or optional) fees revealed through the purchasing journey. The concern is that drip pricing “baits” consumers with the first price they see, which impacts their ability to make an informed purchasing decision and causes traders to compete with artificially low headline prices.

The Government notes in the Consultation that drip pricing is “prevalent across the economy”, particularly in the transport and communication, hospitality, and entertainment sectors. In research commissioned by the Government into the entertainment, hospitality, retail, transport and communication sectors, it was found that 46% of the 525 online and mobile app providers sampled include at least one dripped fee (not including delivery fees) as part of their checkout process. Dripped fees were most frequently apparent in the transport & communication sector (72% of providers), compared to the retail sector which featured the practice least frequently of the sectors sampled (15% of providers) once delivery fees are excluded.

Traders are already required to provide consumers with sufficient information for them to make informed purchasing decisions under the Consumer Protection from Unfair Trading Regulations 2008 (“CPRs”), including information about the price and any additional charges. This is largely restated in the DMCC, which will also make the omission of material information from an invitation to purchase a separate unfair commercial practice. Therefore, some drip-pricing practices may already be prohibited (for example, this is likely to be the case where mandatory additional fees are not made clear from the outset).

The Consultation includes questions about whether further intervention is required in order to reduce consumer harm associated with drip pricing, and may therefore result in additional legal requirements in the future. In particular, the Consultation includes questions about optional additional fees (for example, gift wrapping fees). The concern with optional additional fees is that consumers could think they are mandatory because of how they are displayed (for example, through pre-checked tick boxes), or because these fees are not optional for many consumers (for example, a luggage fee in connection with a long-haul flight) and are presented too late in the purchase process.

3. Fake and misleading reviews

The Government is seeking views on whether it should introduce new rules to expressly prohibit the buying and selling of fake reviews, and to compel firms to take reasonable and proportionate steps to protect consumers from fake reviews.

After a consultation in 2021, the Government committed to consult on adding three new entries to the list of banned unfair commercial practices in Schedule 1 of the CPRs (which will likely soon be replaced by a materially similar Schedule 18 of the DMCC).  The Consultation requests views on proposals to add the following practices to the list:

• Submitting a fake review, or commissioning or incentivising any person to write and/or submit a fake review of products or traders.
• Offering or advertising to submit, commission or facilitate a fake review.
• Misrepresenting reviews, or publishing or providing access to reviews of products and/or traders without taking reasonable and proportionate steps to:
  • remove and prevent consumers from encountering fake reviews;
  • prevent any other information presented on the platform that is determined or influenced by reviews from being false or in any way capable of misleading consumers.

Whilst the CMA has already been taking action in relation to unfair reviews in reliance on the CPRs, the introduction of these new unfair commercial practices would make it easier for the CMA to take enforcement action in the future. However, the Consultation seems to recognise that these new practices may cause practical compliance difficulties for traders (particularly in relation to the third practice listed above, where the standard of “reasonable and proportionate steps” may leave traders unclear as to their obligations), and states that the Government plans to work with the CMA to produce explanatory guidance for traders. The Consultation suggests that this guidance would be legally binding on traders, with the CMA potentially taking enforcement action against traders who fail to follow the guidance.

The Consultation also seeks views about whether the list of automatically unfair commercial practices (as listed at Schedule 1 of the CPRs and reflected in Schedule 18 of the DMCC) needs to be amended or supplemented with new practices.

4. Online platforms

The DMCC restates the existing requirement applicable to traders – including online platforms – to act with professional diligence in their dealings with consumers. The Consultation highlights the emergence of e-commerce on social media sites and platforms, and therefore the increasing potential for consumer harms. The Government wants to provide guidance in this area to improve compliance and increase consumer trust when shopping online.  The Consultation includes questions about the professional diligence standard within the context of online platforms, and how best practice should be communicated (for example, through government guidance, a code of conduct, a self-regulatory forum, or other options).

5. Protection from unfair trading

The DMCC replicates the right for consumers to exercise private rights of redress where they have been the victim of a misleading action or an aggressive practice, as provided under the CPRs. In the Consultation, the Government is seeking views on whether further unfair commercial practices (for example, misleading omissions) should attract private rights of redress.

6. Online interface orders

Under the Enterprise Act 2002, the CMA can apply for an online interface order (“OIO”) or an interim online interface order (“IOIO”) as a matter of last resort to take certain steps with regards to online interfaces such as websites and apps. For example, these orders could require the removal of online content, the disabling of a website, or the deletion of a domain name. These orders are seen as a potentially effective tool due to the fact they can be made against third parties as well as the infringing trader. For example, in instances where the infringing trader cannot be identified due to being based in a jurisdiction beyond an enforcer’s reach, the CMA can seek to prevent the harmful practice by taking formal enforcement action against a third party which owns and/or operates the online interface. The Consultation gives the example of tickets being unlawfully offered for sale for the 2012 Olympics, which was ultimately addressed through a court-ordered website redirection being established (although this was the result of an application brought by the OFT, the predecessor to the CMA, rather than in reliance on OIO or IOIO powers).

The Government is consulting on whether the OIO powers should be extended to additional consumer law enforcers (beyond the CMA) under the DMCC. Interestingly, the CMA was only granted OIO powers in 2020, and we are not aware of any instances where the CMA has actually used these powers or publicly reported on them, which does beg the question of why they need to be extended to others enforcers.

Next steps and CMS comment

The Consultation, which can be accessed here, runs for six weeks and concludes on 15 October 2023.  The Government’s response is planned to be published in Autumn 2023.

It will be interesting to see what new requirements and guidance will emerge from the Consultation. At this stage, we think it is likely that there will be clearer requirements in relation to unit pricing (where the law is currently confusing and difficult for businesses to apply) and new banned unfair commercial practices in relation to fake reviews. In addition, there may be new rules on drip pricing (where it will be particularly interesting to see whether optional additional fees will be regulated); new guidance for online platforms in relation to the professional diligence requirement; and enhanced consumer rights of redress and regulatory powers. 

Kevin Hollinrake, the Minister for Enterprise, Markets and Small Businesses, has said that the Government will be listening to the industry to ensure that any new measures are workable for businesses to avoid unnecessary regulatory burdens, though we note the Consultation is also reviewing whether the small shops exception in the PMO should continue to apply. In any event, it’s clear that the general direction of travel – as per the DMCC – is towards more, rather than less, consumer protection regulation.

The Government is also reportedly considering reform of the Consumer Contract (Information, Cancellation and Additional Charges) Regulations 2013 (“CCRs”), however this is at an early stage and no consultation or specific proposals have yet been announced. In our view, a refresh of the CCRs would benefit both businesses and consumers, given that the CCRs can sometimes be tricky for businesses to apply in practice. One change that is already afoot is that, as explained in our article here, it is likely that the CCRs will no longer apply to subscription contracts, which will instead be governed by new rules under the DMCC.

If you would like to discuss the Consultation or any other consumer law issue, please do not hesitate to contact one of our specialists.