As we ease ourselves into 2023, there has been a recent flurry of activity at UK and EU level in relation to consumer protection law matters. Here is our round-up of the “hot” consumer law topics which consumer-facing businesses should keep an eye on over the coming year, and which are likely to lead to direct enforcement action:
1 - Two-tiered EU regime for online platforms and online search engines kicks off this month
The first deadline under the new EU Digital Services Act (DSA) hits this week, on 17 February. By that date, all providers of online platforms and online search engines must publish their average monthly active number of EU recipients of the service (and at least every six months following). The European Commission will use this data to designate “very large online platforms” or “very large online search engines” from those that have more than 45 million monthly EU recipients of the relevant service. Designation has a number of consequences, including that the DSA will potentially apply to those businesses from as early as June or July of this year, with the general application of the DSA to all other businesses only kicking in from February 2024. For more details about the DSA, please see our article here.
2 - Tread carefully when making green claims
With the global environment being of great concern in the current era, greenwashing is a hot topic across the UK and EU, with environmental and sustainability claims being subject to increasing regulatory scrutiny. The CMA has published guidance and has two open investigations on this topic. Last year, an investigation commenced in relation to green claims made in the fashion sector and more recently, the CMA announced a second investigation in relation to fast-moving consumer goods. No specific businesses have been named as in scope for this more recent investigation, but the CMA has said it will focus on businesses making vague and broad eco-statements with no evidence, product ranges being branded as sustainable, and misleading claims about the use of recycled materials. This is unlikely to be the end of the CMA’s action on greenwashing. The Advertising Standards Authority also made various rulings relating to green claims in 2022. Across the EU, in addition to Member State level action (see here for more information), the European Consumer Protection Cooperation Network has identified this area as a key trend that is likely to affect consumers’ interests across the EU. The European Commission is also planning to introduce a new regulation to require businesses to substantiate claims they make about the environmental footprint of their products/services by using standard methods for quantifying them.
3 - Know your dark patterns risk
The term dark patterns is becoming an increasing feature of legislator and regulator discussions in the consumer law space. The concept relates to practices that allegedly mislead consumers through the design, structure, function or operation of an online interface (such as a website) to serve a business’ commercial interests. So-called “dark patterns” include creating a false sense of urgency/scarcity and a fear of missing out (for example, by using count-down clocks for special offers) and obstructing or confusing customers (for example, by making it difficult to cancel a subscription). For more details about dark patterns, see our recent article here.
Whilst there are currently no plans in the UK to introduce specific laws in relation to dark patterns, the CMA has already taken enforcement action in reliance on existing consumer protection laws. Recently, the CMA announced an investigation into the Emma Group’s use of urgency tactics such as countdown clocks and discount offers. The CEO of the CMA, Sarah Cardell, has said that this investigation is “just the start” of the CMA’s work into potentially misleading online claims and that “all sectors are under scrutiny”.
In the EU, the DSA includes a general prohibition on designing online interfaces in a way that deceives or manipulates the recipient of the service or materially distorts or impairs their ability to make free and informed decisions. The European Commission is also currently running a consultation to examine the adequacy of certain consumer protection laws in dealing with various consumer protection issues including dark patterns, in order to establish whether the existing rules would benefit from improvement. The consultation asks for respondents' views about various potential improvements to consumer law, several of which touch on the concept of dark patterns. In time, the European Commission may look to introduce specific legislation and/or perhaps strengthen guidance in relation to the existing legislation. Recently, the European Commission and national consumer protection authorities of 23 Member States, Norway and Iceland (acting through the CPC Network) released the results of a screening (“sweep”) of retail websites (30 January 2023). The sweep focused on three specific types of ‘dark patterns': fake countdown timers; web interfaces designed to lead consumers to purchases, subscriptions or other choices; and hidden information. 148 sites contained at least one of these three dark patterns. For more information, see here.
If dark patterns is not a concept with which you and your consumer-facing business are currently familiar, we recommend learning more and assessing whether any changes should be made to reduce the compliance risk. It will be increasingly difficult to justify the use of certain online practices.
4 - Pricing is under the spotlight
With the current cost of living a real concern across the UK and EU, pricing is currently under the spotlight. In the UK, the CMA has recently launched a “unit pricing” review in the groceries sector. Unit pricing is designed to show how much a product costs by weight or volume, and help consumers identify best value for money. The timing is curious, given the investigation follows previous work around 7 ½ years ago as part of the 2015 Groceries Super-complaint, where the CMA concluded that issues relating to unit pricing – including difficulties in complying with the law and inconsistencies with how retailers present unit prices for similar products and products on promotion - may prevent shoppers from identifying which products represent the best value. The law in this area is complex, and flows from an EU directive which has resulted in different approaches across Europe. Following Brexit, there is an opportunity to create a position in the UK which is much more straightforward for businesses and consumers.
In the EU, the same directive has been amended to require businesses (when announcing price reductions) to always show the lowest price of the product in the last 30 days (or longer). Breach of this requirement can, in theory, result in significant fines of up to 4% of turnover (see here for further information). Whilst this requirement has been in place since May last year, compliance has been very patchy across the EU. 13 Member States joined a CPC “sweep” of 16,000 products across 176 websites in respect of Black Friday discounts last year, finding alleged breaches on at least 43% of websites which impacted 1 in 4 products. Whilst there has been limited action taken against businesses to date, we are now starting to see enforcement in a number of jurisdictions.
5 - More compliance requirements and greater enforcement risk
In April 2022, the UK Government announced that it plans to make significant reforms to consumer protection law. It is anticipated that the Digital Markets, Competition and Consumer Bill will be published this Spring/Summer. Within the potential scope of the reforms are new requirements in relation to online reviews and subscription contracts, and enhanced enforcement powers, including the ability for the CMA to enforce consumer law and fine businesses up to 10% of global turnover – increasing the compliance burden on businesses over and above the recent changes across the EU. For more information, see our article here.
6 - What will English consumer protection law even look like?
The Retained EU Law (Revocation and Reform) Bill 2022 is currently under review by the House of Lords. If passed, one of the main consequences would be the revocation of the majority of retained EU law (a category of English law created at the end of the Brexit transition period and based on EU-derived law that applied to the UK at that time) at the end of 2023, unless a later date is specified in regulations in relation to specific pieces of legislation. However, there will be powers to restate certain laws until June 2026 and make changes to such restated laws.
There has been significant opposition to the Bill so far. From a consumer law perspective, it seems at odds with the other developments reported above. Businesses would have significantly fewer compliance obligations, given that much of English consumer law (but not all) is EU derived (for example, the rules around distance selling, unfair terms and unfair commercial practices). Unless the relevant laws are promptly restated (or new laws put in place, which is extremely unlikely given the available time), the Bill would leave the CMA unable to take action in relation to many potential consumer law issues, including misleading green claims or dark patterns. At this stage, we recommend keeping the Bill under review and taking any opportunity (where appropriate) to seek to shape the position going forward.
If your business has been approached by the CMA or a European regulator, or if you would like to discuss a consumer law issue, please do not hesitate to contact one of our specialists.