CONSUMER LAW: An Introduction

Overview   

These are interesting times for consumer-facing businesses. Brexit transition periods are coming to an end. The future of retained EU consumer law is uncertain and regulatory divergence between the UK and its European counterparts is starting to emerge, creating additional regulatory burdens for businesses. Consumer buying habits and technologies are evolving and changing in ways not foreseen by legislators. New products such as NFTs, wearable health devices, CBD products and novel foods, the regulation of which may cut across multiple regulatory regimes, are flooding the markets, whilst issues such as online sales, online choice architecture and “greenwashing” continue to attract the attention of regulators. Existing consumer protection legislation is increasingly perceived as unfit for purpose and the government has identified competition and consumer policy reform as a legislative priority. 2023 is expected to see the fruition of long-heralded reforms to tackle some of these issues, which are outlined below. At the same time, the UK, and potentially the world, appears headed for recession. Regulators are operating on ever tightening budgets, whilst criminals are finding new ways to target ever more vulnerable consumers.

Legislative Landscape   

Although the UK has been out of the EU for some time, it is still unclear what legislation retained under the EU (Withdrawal) Act 2018 will remain on the statute books. The much-discussed Retained EU Law Bill is currently making its way through Parliament with the potential to sunset some 4,000 pieces of legislation by the end of the year. At the same time, the government has confirmed that it plans to put the Digital Markets, Competition and Consumer Bill, first announced in the Queen’s Speech in May, before Parliament. In addition to giving more powers to the Competition and Markets Authority (CMA), see below, the Bill tackles the twin mischiefs of subscription traps and fake reviews, which have dominated the online sphere in recent years. The Bill will strengthen pre-contract information requirements for subscription contracts, require consumers to be nudged before any auto-renewal and make it easier to exit subscription contracts. Fake reviews are expected to be dealt with by additions to the existing list of banned practices under the Consumer Protection from Unfair Trading Regulations 2008. These banned practices will include (i) commissioning or incentivising any person to write and/or submit a fake consumer review of goods or services, (ii) hosting consumer reviews without taking reasonable and proportionate steps to check that they are genuine and (iii) offering or advertising to submit, commission or facilitate fake reviews.

Four Prime Ministers since the Online Harms White Paper was first published, the Online Safety Bill (OSB) has recently had its second reading in the House of Lords. The Bill tackles thorny subjects such as the responsibility of social media platforms to tackle illegal content, the use of age verification measures and the promotion of harmful content in social media algorithms. For online service providers operating in the EU as well as the UK, the increasingly divergent regulatory landscape will be difficult to navigate, not least because the EU Digital Services Act and the OSB, whilst addressing largely the same subject matter, differ in several key respects. In particular, whilst the OSB’s scope is generally narrower, the obligations it imposes on providers are significantly more stringent (these include the obligation on all, rather than just the largest, services providers to carry out illegal content risk assessments and mitigate any identified risks). Further uncertainty stems from the OSB preserving much of the detail for secondary legislation, guidance and codes of practice such that the full extent of the OSB’s regulatory burden will be difficult to assess for some time to come.

These digital marketing reforms are part of a wider ongoing conversation about online choice architecture and “dark pattern advertising” (deceptive or manipulative digital design techniques). In February 2023, the European Commission finished consulting on its Fitness Check of EU Consumer law on digital fairness. Hidden advertising on social media, including by influencers, remains a hot topic globally, with the CMA recently publishing guidance on this issue.

Greenwashing 

Greenwashing remains another area of considerable interest to regulators, businesses and consumers, in the UK and more widely. Greenwashing refers in broad terms to the making of unsubstantiated and possibly misleading claims in relation to a product or a company’s environmental credentials. Consumers are increasingly interested in sustainable and environmentally friendly products, which provides a significant incentive to businesses to market products in this way. One difficulty is that the terms used in such claims – eg, “natural”, “ethical”, “eco-friendly” or “sustainable” – are often ambiguous, generic or vague. To tackle this, in spring 2023 the European Commission is expected to put forward its proposal for a Green Claims Directive which would require businesses to ensure that voluntary environmental claims are scientifically proven. In the UK, green claims are regulated under existing consumer legislation and have been an area of particular focus for regulators – including the CMA, the Financial Conduct Authority (FCA), the Advertising Standards Authority (ASA) and trading standards – in recent years. In September 2021, the CMA published a Green Claims Code to assist businesses making green claims to comply with consumer protection law. In 2022, it started monitoring compliance and is currently investigating several fashion brands in relation to potential breaches of consumer protection law. Other investigations will no doubt follow. The ASA has also published guidance on green claims and upheld a number of complaints relating to such claims.

Enhanced Consumer Enforcement Powers  

The current regime requires the CMA to enforce consumer law through the courts, which has resulted in many infringements being dealt with by way of undertakings from non-compliant businesses. This is about to change, with the CMA acquiring new powers not only to decide whether consumer law has been breached, but to impose fines as high as 10% of a non-compliant trader’s global annual turnover, no doubt resulting in increased enforcement activity.

Criminal Enforcement Trends  

As energy prices and the cost of living continue to rise, so too do the opportunities presented to unscrupulous traders seeking to take advantage of consumers. Particular examples are the home improvement sector, where consumers are faced with price increases arising from contractor shortages, supply chain issues and increased materials costs; and energy-related fraud, with a number of large scale fraud prosecutions due to take place this year.

Looking further forward, product safety, in particular construction products and fire safety, are sectors likely to receive close attention when the Grenfell Tower Inquiry report is finally published.

Conclusion 

2023 will be an important year for consumer law. The CMA will be acquiring administrative powers, which is likely to see an increase in consumer enforcement. It will be important to stay abreast of legal developments and how these might impact on specific sectors and businesses. Those operating in the EU as well as the UK will have the challenging task of keeping an eye on divergence between the two regimes.