CONSUMER LAW: An Introduction

Overview 

These are interesting times for consumer-facing businesses. Brexit transition periods are coming to an end 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 non-fungible tokens, 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 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. It is expected that 2024 will see the fruition of long-heralded reforms to tackle some of these issues, which are outlined below. At the same time, regulators are operating on ever-tightening budgets, whilst criminals are finding new ways to target ever more vulnerable consumers.

Legislative Landscape 

The much-discussed Retained EU Law (Revocation and Reform) Act 2023 (the “REUL Act”) has now been passed, with the Government shelving plans to sunset some 4,000 pieces of legislation by the end of 2023. The REUL Act will, however, have implications for the way retained EU law (which will be called “assimilated law” after the end of 2023) is applied by the courts, not least because the Act does away with the supremacy of EU law in relation to all EU-derived measures, whenever passed. At the same time, the Digital Markets, Competition and Consumer Bill (the “DMCC Bill”) is progressing through Parliament. In addition to giving fining powers to the Competition and Markets Authority (CMA), the Bill revokes and replaces the Consumer Protection from Unfair Trading Regulations (CPUT) and provides for a higher level of consumer protection. This includes providing consumers with express rights in relation to subscriptions: the Bill will strengthen pre-contract information requirements for subscription contracts, require consumers to be nudged before any auto-renewal and will make it easier to exit subscription contracts. In addition, the government is currently consulting on whether to add fake reviews to the existing list of banned practices, currently in Schedule 1 of CPUT (to be found in Schedule 18 of the DMCC Bill).

Four Prime Ministers since the Online Harms White Paper was first published, the text of the Online Safety Bill (OSB) has been agreed by both Houses of Parliament and the date of Royal Assent is due to be announced. The OSB 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 and is due to publish its report in the second quarter of 2024. Hidden advertising on social media, including by influencers, remains a hot topic globally, with the CMA recently publishing guidance on this issue. Further attention has been drawn to online choice architecture by the CMA’s papers published in 2022 and guidance on the subject, published jointly with the Information Commissioner’s Office.

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 March 2023 the European Commission published 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, starting with the fast fashion sector. It has now expanded its work into “fast moving consumer goods”, which are essential household items such as food and drink, cleaning products, toiletries and personal care items. It is currently still 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 (i) the home improvement sector, where consumers are faced with price increases arising from contractor shortages, supply chain issues and increased materials costs; and (ii) energy-related fraud, in respect of which there have been a number of large-scale fraud prosecutions.

Product Safety 

The government is currently consulting on product safety regulation. The consultation proposals, if taken forward, would result in significant divergence from EU law. New secondary legislation to regulate the safety of construction products, following the Grenfell Tower fire, is likely to be introduced in 2024.

Conclusion  

The year 2024 will be an important one for consumer law. The CMA will be acquiring administrative powers, which is likely to lead to an increase in consumer enforcement. It will be important to stay abreast of legal developments and how these might impact 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.