At a glance
The Digital Markets, Competition and Consumers Act 2024 (‘DMCC Act') was passed on 24th May 2024 and is to come into effect in Autumn 2024. The Act has a broad scope and, as its title suggests, introduces new regulations in relation to digital markets, competition law, and consumer protection. In this briefing we focus on the changes which it introduces to consumer protections and its impact on Direct to Consumer (D2C) business.
Subscription contracts. A ‘subscription contract' within the scope of the Act is one which automatically renews or which continues for an indefinite or fixed period during which the consumer has a continuing automatic liability in relation to a continuing supply until they exercise their right to cancel (whether or not the contract has an initial ‘free trial' or ‘reduced price' period). In respect of such contracts, traders must:
- provide consumers with specified information before they place their order or enter into the contract (whichever comes first) to ensure that they understand the nature of the contract, including the nature, timing and amounts of the charges, the length of the contract including any minimum period, and what the consumer needs to do to end the contract;
- issue customers with clear reminder notices before a free trial or low-cost introductory offer ends and converts to a paid or more costly subscription, and at six monthly intervals thereafter; and
- allow customers to exit a subscription contract in a straightforward, cost-effective and timely way, without having to take any steps that are not reasonably necessary – a customer must be able to notify a business of their intention to exit by “making a clear statement” setting out their decision to bring the contract to an end.
The Act also gives consumers cooling off rights. Consumers have a right to cancel a subscription contract within 14 days of entering into it. They have further rights to cancel for 14 days after the expiry of any initial ‘free' or ‘reduced price' period, and after any renewal which commits them to a further period of 12 months or more. When a consumer cancels a subscription contract for breach, or by exercising their cooling off rights, or if they terminate under their contractual rights, then the trader must give them an ‘end of contract' notice.
It should be noted that when consumers buy products online there are certain procedures that must be followed and certain information which must be provided to them under the Consumer Contracts Regulations 2013, but whilst those Regulations will continue to apply to single product sales, the DMCC Act will apply to repeat product sales under a subscription contract. As a result, some products exempt from cancellation rights under the Consumer Contracts Regulations will be subject to those rights if they are supplied under a subscription contract within the scope of the DMCC Act, including (i) customised, bespoke or personalised goods, (ii) goods sealed for health protection or hygiene reasons which are unsealed after delivery, and (iii) goods that are liable to deteriorate or expire rapidly.
Drip pricing. Information about the total price of a product, including any fees, taxes, charges, or other mandatory payments that the customer will incur if they make the purchase (or, if the total price cannot be calculated in advance, the existence of such costs and how they will be calculated) and any optional fees (e.g. delivery charges or a seat reservation on a flight) are part of the material information that traders must include in an ‘invitation to purchase' (broadly, an advertisement for a product which includes a price).
This is aimed at preventing businesses from ‘baiting' customers with a low base price, but then ‘drip feeding' additional costs during the ordering process resulting in a higher final price. When determining whether the trader has fulfilled its information obligations, any limitations of the communication medium (including limitations of space or time) are relevant, as are any steps taken by the trader to overcome those limitations by providing the information by other means.
Fake reviews. Submitting, or commissioning another person to submit or write, a fake consumer review or a consumer review that conceals the fact that it has been incentivised, or publishing consumer reviews or consumer review information in a misleading way, or not taking reasonable and proportionate steps to prevent the publication or removal of such reviews or information, is prohibited by including these activities in the list of those banned practices which are automatically considered unfair in Schedule 19 of the Act (which schedule otherwise generally restates and replaces the list of such banned practices in the Unfair Trading Regulations 2008).
Consumer Savings Schemes. Traders operating consumer saving schemes – covering Christmas hamper clubs and similar schemes – will be required to insure consumer deposits, or place them in trust, to protect consumers against a scheme insolvency.
The CMA will have the power to directly enforce consumer protection laws in the UK and to impose sanctions for breaches (up to 10% of global turnover), so the CMA will no longer need to apply to the courts for enforcement orders. These enforcement powers can be exercised against all businesses that sell to UK consumers and not simply those businesses which are in the UK and accordingly there is an ‘extra-territorial' scope to the Act.
These ‘judge and jury' powers in relation to consumer protection are similar to those already granted to the CMA in relation to competition law and to regulators such as the ICO in relation to data protection, and their scope includes the enforcement of the existing prohibition of ‘unfair commercial practices' imported from the Unfair Trading Regulations, and so includes, for example, misleading or aggressive commercial practices such as ‘urgency claims' or ‘price reduction claims' which may mislead or put unfair pressure on consumers.
The Act also includes powers for the Government to add to the list of prohibited commercial practices by way of separate regulations made under the Act, so that it can, for example, deal specifically with various forms of pressure selling previously highlighted by the CMA, for example in its recent ‘Rip-Off Tip-Off' campaign.
These are important changes to the UK's consumer protection regime which D2C businesses should prepare for before the Act takes effect. Businesses operating internationally will also be aware of recent or planned changes in consumer protection laws in the EU under its ‘New Consumer Agenda' and in the US under the Federal Trade Commission's ‘Negative Option Rule', but it should be noted that the UK's regime is distinct and that compliance with each of these regimes will require separate considerations and arrangements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.