Top consumer law issues we were talking about in 2015

This article was produced by Olswang LLP, which joined with CMS on 1 May 2017.

The Consumer Rights Act 2015 (“CRA”) came into force on 1 October 2015, consolidating existing consumer legislation and making a variety of changes to the consumer law landscape. The CRA followed hot on the heels of the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013, which came into force in June 2014 which, amongst other things, extended the cooling off periods for distance contracts to 14 days, banned additional charges levied by pre-ticked boxes and increased the information businesses must give to consumers buying goods, services or digital content from them.

In recent years, we have seen changes in the primary regulator responsible for enforcing consumer law. It is now the Competition and Markets Authority (“CMA”), which has been given greater enforcement powers than its predecessor, the OFT. It has certainly appeared keen to flex its muscles and its recently announced investigations, for example into cloud storage services and price comparison websites, have been keeping our CMA practice busy!

As the dust begins to settle and businesses begin to adapt to these changes, we look back at some of the most frequently asked questions about consumer law in 2015, and look ahead to what changes may still be on the horizon.

1. Could my company be fined for breaching the CRA?

Currently, the answer is no – although this could be set to change. The CRA extended the powers that regulators and the courts have to remedy breaches of consumer law with the introduction of ‘enhanced consumer measures’. These are made up of compliance measures for the trader, requirements for the trader to provide information on its record of compliance and various methods of redress for the consumer – including scope for the CMA to order a business to pay compensation. As part of the enhanced measures, the CMA can require a business to pay the equivalent of any loss suffered by consumers to charity where it is not possible to identify affected consumers or where large numbers of customers have each suffered a small amount of loss. At the time of writing, the CMA has not been reported to have taken measures of this kind, although businesses should bear in mind that the amount of this repayment fund is, in theory, uncapped.

Whilst these measures do not yet allow for the issuing of fines, the CMA recently stated that the government has begun consultations on the introduction of civil fining powers for breaches of consumer protection laws. There are no further details publicly available on this review, but depending on the outcome, businesses that enter into B2C contracts could risk serious financial penalties if they fall foul of consumer protection laws.

2. Could my business or sector be the subject of enforcement action for consumer law breaches by the CMA?

For any consumer-facing business, the short answer is yes. The CMA’s responsibilities include conducting studies and investigations in markets where there may be consumer problems and enforcing consumer protection legislation to tackle practices and market conditions that make it difficult for consumers to exercise choice. Although there is no definitive way of knowing whether the CMA is monitoring your industry, it may be possible to track the CMA’s movements by keeping an eye on its website publications. Of note, the CMA has recently announced a review of the cloud storage sector following reports of substantial price increases and changes to terms of use once consumers have entered into a contract. Following its call for information last year on the use of online reviews and endorsements, the CMA also announced that it had launched investigations into a number of companies in connection with the potential non-disclosure of paid endorsements.

3. How does the CRA apply to…..?

We have noticed businesses are finding it tricky to apply the new rules to real life operational issues which it was apparent the legislation had not considered or explicitly catered for. For example:

• How do the new rules apply to delivery and fulfilment models, such as click and collect?
• How do the rules apply to subscription services similar to Netflix or Spotify? Are they digital content or services? How do free trials work? How should in-term price increases be dealt with?
• How do consumer guarantees interact with the consumer’s remedies for defective goods, services and digital content, especially when the party giving a guarantee is not the direct seller of the goods, services or digital content to the consumer?
• When do cancellation periods begin?
• What amounts can a business require a consumer to pay in the event of cancellation?

Earlier last year, we produced a guide to the CRA which you can find here.

4. I’ve heard the European Commission is launching an online dispute resolution (ODR) platform – what exactly is this? Is it true we need to provide a link to it on our website?

In order to facilitate dispute resolution, the Commission is developing an EU-wide ODR platform which will provide a cheaper, faster and more accessible way to resolve disputes relating to a consumer’s complaint about goods or services they have bought online. Consumers will be able to submit a dispute online via this platform, which will be allocated to one of the listed ADR bodies. As of 15 February 2016, any business that enters into online B2C contracts for goods and services will be required to provide the link to the ODR platform and the business’s email address on its website. Where the business is obliged to use ADR services provided by a listed ADR body, it must also provide the platform link in any offers sent to consumers by email, and state the existence of the platform and its purpose in its terms and conditions.

5. Is consumer protection enforcement action confined to national borders? Do consumer protection regulators share information with their cross-border counterparts?

The consumer protection bodies of over 50 countries, including the UK’s CMA, are members of the International Consumer Protection and Enforcement Network (ICPEN) – a global network of authorities that enables cross-border cooperation. Through the sharing of consumer complaints and recurring issues, these agencies are able to identify trends in breaches of consumer protection law and consequently increase their enforcement capabilities. Since the CMA took up presidency in July of this year, ICPEN have launched an improved and more user-friendly complaints site, which provides consumers from 34 ICPEN member countries with a platform to submit and resolve complaints. The CMA will hold the presidency until June 2016.

On a European level, the national consumer regulators from all the EEA countries form the Consumer Protection Cooperation (‘CPC’) Network, which on a yearly basis reveals common enforcement issues surrounding areas such as unfair commercial practices, e-commerce, and comparative advertising. The first “project” of the CPC Network was its investigation into in-app purchases and it subsequently secured undertakings from Apple and Google to make various changes to their services.

6. I’ve heard about a new transparency in supply chains requirement – what must my business do to stay compliant?

If your business operates in the UK, supplies goods or services and has a minimum total turnover of £36 million, you will be required to prepare an annual statement outlining the steps, if any, that have been taken to ensure your business and supply chains are free of slavery and human trafficking. This statement should be published on your website, or if you do not have a website, provided in response to any written request. The requirement applies to financial years ending on or after 31 March 2016 but gives no set time limit as to when the statement should be made. Whilst there is no strict form that the statement must take, the Modern Slavery Act provides a list of information which may be included, this being:

• your organisation’s structure, business and supply chains;
• its policies on slavery and human trafficking;
• its due diligence processes in relation to slavery and human trafficking in its business and supply chains;
• the parts of its business and supply chains where there is a risk of slavery and human trafficking taking place, and the steps it has taken to assess and manage that risk;
• its effectiveness in ensuring that slavery and human trafficking is not taking place in its business or supply chains, measured against such performance indicators as it considers appropriate; and
• the training about slavery and human trafficking available to its staff.

The Home Office guidance advises affected businesses further on how to produce the statement, and provides examples of the type of information it should contain.

7. What exactly is the Digital Single Market Strategy and what impact could it have on consumer law?

The Digital Single Market Strategy is an EU initiative, with one of the aims being to reduce barriers to cross-border trade across Europe. As part of this strategy, the EU published two draft Directives in December on certain aspects of contracts concerning the supply of digital content and the online and other distance sales of goods. Although these still need to go through the legislative process, if passed, the Directives could entail changes to current UK consumer legislation, including the Consumer Rights Act.

One effect of these changes is that businesses will be able to supply digital content and sell goods online to consumers throughout the EU based on the same set of contract rules. The changes will also mean that in many circumstances, consumers will benefit from an even higher level of consumer protection. Specific changes in relation to digital content include the same rights and remedies applying to free and paid-for digital content, no requirement for the consumer to prove that any defect existed at the time of delivery and greater termination rights for consumers.

If you would like to speak to anyone in relation to any of the issues in this article, or other aspects of consumer law, please contact Anna Soilleux.