Judge, Jury and Executioner: the CMA publishes its final consumer enforcement guidance

With the consumer law provisions of the Digital Markets, Competition and Consumers Act (“DMCC Act”) coming into force on 6 April 2025 (see here), the CMA has now published its final guidance on direct enforcement, setting out the framework and process for imposing fines of up to 10% of global turnover on businesses.

Following a seven week consultation on the draft direct consumer enforcement guidance and rules, the Competition and Markets Authority’s (“CMA”) final guidance is available here (the “Guidance”).

The Guidance covers, amongst other things, the enforcement process, undertakings, settlement and remedies, penalties and the CMA’s decision making and complaints handling processes. 

Along with the Guidance, the CMA has also published its response to the consultation and the non-confidential responses to the consultation that it received. These can be accessed here.

Overview of the CMA’s direct consumer enforcement powers

One of the most significant changes introduced by the DMCC Act is the CMA’s new direct consumer enforcement powers. From 6 April 2025, the CMA will be able to directly enforce consumer laws, determining whether businesses are compliant with the law, and impose fines of up to 10% of global turnover for breach of consumer protection laws, all without the “inconvenience” of prior independent scrutiny by the courts.

There are broadly four stages to the direct consumer enforcement process:

• Pre-launch - this is the period leading up to case opening when the CMA decides whether to open a formal investigation under its direct consumer enforcement powers. The CMA may open an investigation with a view to using its direct consumer enforcement powers when it has reasonable grounds to suspect a business has engaged, is engaging or is likely to engage in a commercial practice that constitutes an infringement of any of the legislation listed in Schedule 16 to the DMCC Act (broadly speaking, most B2C legislation);
• Investigation – the CMA will open a direct consumer enforcement investigation and, if it considers it is appropriate to do so, give a Provisional Infringement Notice (“PIN”) to parties under investigation. During this initial phase, the CMA will investigate whether (in its view) consumer law has been breached. If the CMA gives a PIN to a party under investigation, it will invite the party to make representations about the giving of the notice and then consider, in light of any representations received, whether to give the party a Final Infringement Notice (“FIN”). Parties may make representations in writing or at an oral hearing, or both.
• Final decision - where, having considered any written and oral representations, the CMA is (in its view) satisfied that the party has engaged, is engaging, or is likely to engage in a commercial practice constituting a relevant infringement (or the party is an accessory to such a practice) the CMA will give a FIN to that party.
• Post-decision – there is a full merits right of appeal of all decisions, including a decision to impose a monetary penalty, the nature or amount of any such penalty, and/or the giving of directions. These appeals must be made to the High Court in England and Wales or Northern Ireland or to the Outer House of the Court of Session in Scotland.

In moving through these phases there are three key decisions to be made by the CMA, each requiring the satisfaction of certain legal thresholds: (i) opening a case (there must be reasonable grounds to suspect there has been an infringement), (ii) issuing a Provisional Infringement Notice (there must be reasonable grounds to believe there has been an infringement) and (iii) issuing a Final Infringement Notice (the CMA must be satisfied of an infringement).

A full process map for the enforcement process can be found at Annex C to the Guidance.

Draft guidance vs final Guidance: what’s changed?

The CMA received 19 responses (including a response from CMS) to its consultation on the draft direct consumer enforcement guidance and rules. The Guidance largely mirrors the CMA’s previous draft guidance, but there are some notable changes made as a result of the responses received, as well as some additional practical examples in an attempt to bring the theoretical guidance to life:

• Deadline for written representations – one of the concerns with the draft guidance was the limited timeframes for businesses to be able to make representations following receipt of a PIN.  As a result, the timeframes have been marginally extended from between 20 to 30 working days, to between 20 to 40 working days (and critically, potentially longer in appropriate circumstances).^[1]
• Attendance at oral hearings – given the complexities often involved in consumer investigations and the need to rely on, for example, expert evidence, it was odd that only the business concerned and their legal advisers were permitted to attend any oral hearings. Following submissions from 6 respondents, including CMS, the CMA has shifted its position and confirmed that the oral hearing can now also be attended by other advisers.^[2]
• Calculation of penalties – The CMA has made a number of changes concerning penalties in response to concerns and queries raised. The CMA has added some non-exhaustive illustrative examples of how the CMA’s powers to impose a monetary penalty might apply in selected potential scenarios. The CMA has provided five examples which, in their view, range from major harm / high culpability (known as category “High A”) to harm / medium culpability (known as category “D”).
  • An example of a High A case would be where the trader has made a false claim/statement in breach of section 226 of the DMCC Act (misleading actions) and its revenue from sales of the product about which the false claim/statement is made are in the tens of millions of pounds.
  • An example of a category D case would be where the trader has made a false claim/statement in breach of section 226 of the DMCC Act (misleading actions) and its revenue from sales of the product about which the false claim/statement is made is less than £10,000.

The CMA has confirmed that in High A cases, the starting point will be somewhere close to 30% of the traders UK turnover. In category D cases, the starting point would be £75,000 or 7.5% of UK turnover (whichever is higher). All of this is, however, subject to challenge if and when the CMA seeks to impose any such penalty.

• Calculation of penalties – the CMA has also clarified its view of the calculation of penalties, for example further explaining economic and non-economic harm and on calculating turnover for the purposes of the relevant statutory caps for penalties and the starting point. Further detail can be found in paragraphs 7.16 to 7.18 and Annex D of the Guidance.
• Reasonable excuse provisions – where the CMA has determined that a business has breached undertakings or directions, failed to comply with an information notice, or provides materially false or misleading information to the CMA, the CMA has the power to impose a fine on that business, but only where the business does not have a reasonable excuse for its lack of compliance. What amounts to a “reasonable excuse” remains up for debate. In the draft guidance, the CMA provided very extreme examples of what would or would not amount to a reasonable excuse. Following concerns raised by 7 respondents, including CMS, the CMA has added a number of non-exhaustive examples of circumstances that are unlikely to constitute a reasonable excuse. Further examples can be found at paragraph 7.57 of the Guidance. However, the CMA’s position remains extreme and this is likely to be an area of dispute before the courts in the future.
• Duty of Expedition - The CMA has been majoring on its new duty of expedition as a basis for threatening new aggressive timescales of investigation and action against businesses. There has been a degree of push back against the CMA’s position on this, including from CMS, and the CMA now appears to have taken submissions regarding the duty of expedition into account. It may also have slightly softened its position given wider political events and direction from Government. The CMA has now acknowledged that there can be competing considerations between the duty to act reasonably and fairly and the need to act swiftly with regards to any ongoing conduct breaching consumer law which may have a negative impact on consumers as well as other businesses. The CMA has confirmed it will consider how best to balance these considerations whilst ensuring it sets reasonable deadlines on a case-by-case basis.

Comment

A number of the changes in the Guidance are welcome, but it is clear that the enforcement process remains aggressive, with significant risk to businesses caught within the CMA’s crosshairs. The practical examples provided by the CMA are welcome in principle, but they remain extreme and will be tested before the courts in the future. There can now be no doubt that Consumer law risk has rocketed up the agenda for businesses (and Boards), with the baseline goal to be to stay off the radar of the CMA by ensuring compliance wherever possible, and properly understanding the risk profile of compliance decisions made. The enforcement process now has similarities with the Competition law regime, but there remain a number of key differences. The substantive law is also completely different and so expertise in consumer law investigations will remain essential for any business involved in any CMA consumer enforcement action.

Helping your business to get ready for 6 April 2025

We will continue to  publish a series of articles in the lead up to 6 April giving further information on the key changes coming into force and providing practical steps on how businesses can comply with the new regime.

For further information on this or any consumer law issue, please do not hesitate to contact one of our specialists. Our previous articles on the DMCC Act’s impact on consumer law can be found here, with further information on the digital markets and competition law aspects here.
 

^[1] Paragraph 2.37 of the Guidance

^[2] Paragraph 2.44 of the Guidance