Digital Markets, Competition and Consumers Bill: what are the CMA’s powers?

23rd May 2023

In its own words, the Government hopes the Digital Markets, Competition and Consumers Bill will ‘crack down on rip-offs, protect consumer cash online and boost competition’, while also ‘clamping down on subscription traps’. The intention is to address unfair business practices, while promoting the digital economy and increasing consumer choice and confidence.

Sponsored by the Department of Business and Trade, the Bill was introduced to Parliament on 25 April 2023. The Bill and its intended changes have been anticipated for some time.

Now facing its second reading, the Bill broadly seeks to achieve the following:

  • regulate competition in the digital market;
  • amend the Competition Act 1998 and Enterprise Act 2002; and
  • increase consumer rights.

CMA Powers

One key aspect is the intention to grant increased powers to the Competition Market Authority (CMA), primarily through the continued formation of its Digital Markets Unit (DMU). The DMU will have at its disposal stronger tools to investigate competition issues and take faster and more decisive action against breaches of consumer law.

Among these proposed tools are the following headline items:

  • the ability to directly enforce against breaches in consumer law without the requirement to follow court proceedings.
  • the power to issue penalties for breaches of consumer law, up to a maximum of 10% of the global turnover of the offending party, or up to £300,000 for an individual.
  • the power to issue penalties of up to 5% of annual turnover, or up to £150,000 in respect of an individual, in the event of a breach of undertaking to the CMA. This includes the ability to issue daily penalties in the event of ongoing non-compliance.
  • the power to issue penalties of up to 1% of annual turnover, or up to £30,000 in respect of an individual, for failure to comply with an information notice. This also includes the power to issue daily penalties for non-compliance.
  • wider general powers, such as the ability to make targeted interventions or require a business to increase transparency around specific operations or processes.
  • to identify companies with ‘strategic market status’ (global turnover of over £25bn or UK turnover of £1bn), and set specific rules regarding the operation and conduct of any such platform, including in respect of any acquisitions.

Among other aims, the above specifically seeks to address the market dominance held by ‘big tech’, with a view to promoting home-grown start-ups and innovation.

Fake Reviews and Subscription Traps

Consumers will be particularly interested to hear that the Bill intends, at ground level, to address increasing issues relating to false customer reviews and opaque subscription arrangements.

The Bill proposes a new law against the following, imposing obligations on digital platforms in respect of customer reviews:

  • the commissioning of fake customer reviews;
  • the posting of fake reviews without taking reasonable steps to ensure they are genuine; and
  • offering or advertising to submit or commission fake customer reviews.

Estimated to cost consumers £1.6bn per year, subscription traps are also targeted in the Bill. Under the new proposed rules businesses must:

  • provide more transparent details to consumers before they subscribe;
  • issue reminders when free trial periods are coming to an end, or prior to any auto-renewal; and
  • facilitate a straightforward and swift exit process for consumers wishing to terminate their subscription.

What happens next

As cited, the Bill is currently moving toward its second reading and is therefore in its infant stages. It will need to proceed through both Houses of Parliament, among other formalities, before it can be enacted.

As it progresses, the Digital Markets, Competition and Consumers Bill will be scrutinised by a specific committee, and it remains to be seen whether its final version will indeed ‘crack down on rip-offs, protect consumer cash online and boost competition’, while also ‘clamping down on subscription traps’.

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