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Subscribe here: A spotlight on consumer contracts

In this fifth article of our Spotlight series on the DMCC Act, we provide an overview of some of the new consumer protection measures set out in Parts 3 and 4 of the DMCC Act.

1.    Unfair Trading Practices 

The unfair trading practices provisions are set out in Chapter 1 of Part 4 and Schedule 20 of the DMCC Act, with Schedule 20 providing a list of commercial practices that will always be considered unfair. These provisions largely restate existing law, specifically the offences contained in the Consumer Protection from Unfair Trading Regulations (CPRs). However, there are some new offences which hint at areas where we might see increased regulatory focus, such as the offence of omitting material information from an invitation to purchase, which looks at pre-contractual information provided by traders and has a more specific focus than the existing offence of misleading omissions under the CPRs.  

Alongside this, Section 242 provides a mechanism for legislators to tackle new unfair practices as and when they arise by leaving open the possibility of amending Schedule 20 to include additional banned practices. 

2.    Subscriptions

The DMCC Act introduces specific duties in relation to subscription contracts. The definition of a “subscription contract” is broad and explicitly includes free trial periods if the contract automatically extends after. However, certain contracts are excluded from the new provisions (e.g. contracts for the supply of electricity and gas).

  • Pre-contractual Information: In addition to the pre-contractual information that traders must already provide to consumers under the Consumer Contracts Regulations 2013 (CCRs), traders that offer subscription contracts will need to provide further “key-contract information” and separately, “full pre-contract information” as close in time to entering into the contract as practicable. Importantly, there are strict requirements on how and when this information must be provided. For example, the ‘key pre-contractual information’ must be provided separately from any other information. There are additional requirements depending on whether the contract is entered into in person, online or remotely. Traders will therefore need to make changes to their customer journeys to comply with these requirements.
  • Reminders: The Act formally introduces a duty on traders to send reminders to consumers before a subscription contract auto-renews, to reduce the number of inactive subscriptions. Initial drafts of this legislation required this information to be given separately to other information, but the final requirement is to ensure that the reminder notice is more prominent than other information included in the communication, such as marketing information. 
  • Arrangements to end the contract: Traders must provide a straightforward way for consumers to terminate the subscription contract to prevent auto-renewal. Where a subscription contract is entered into online, traders must also provide a method for cancelling this contract online. 
  • End of contract notice: If a consumer has ended a subscription contract, the trader must acknowledge this in a notice containing certain specified information. 

The duties above are automatically implied as terms into any subscription contract by virtue of the DMCC Act. If a trader breaches these implied terms, the consumer has the right to terminate the subscription contract. 

  • Enhanced cooling off rights: Under the CCRs, consumers have a statutory right to cancel distance contracts for any reason - usually within 14 days of entering into the contract/receiving goods. The Act enhances cancellation rights in two key ways. Broadly: (i) for subscriptions that have an initial free or concessionary period, a 14-day cancellation right will apply from when the consumer is first required to pay the full subscription rate; and (ii) for subscription contracts that are 12 months or longer, the consumer will have an additional right to cancel within 14 days of each renewal. 

3.    Fake Reviews 

The Government made it clear when the Act was first introduced as a Bill that fake reviews would be an area of focus, so it is interesting to see that offences relating to submitting, commissioning and publishing fake reviews have been included in the final version of the Act. This has been, and undoubtedly will continue to be, an area of focus for the CMA , so businesses should ensure that their review processes are compliant with the law.

4.    Alternative Dispute Resolution 

Finally, the Act introduces new requirements for alternative dispute resolution (ADR) providers in relation to consumer contract disputes, including an accreditation scheme. 

The Act revokes and mostly restates obligations that already exist in the Alternative Dispute Resolution Consumer Disputes (Amendment) Regulations 2015, which includes an obligation on traders to notify consumers or any ADR schemes that are available to them following a complaint. 

Conclusion

As we explained in our previous article on the DMCC Bill, many of the new provisions relating to subscription contracts align with how the CMA has already been interpreting consumer protection laws, as evidenced by the various investigations launched into auto-renewing contracts in the financial, telecoms, computer anti-virus software and online video gaming sectors. Similarly, the provisions protecting consumers from unfair trading contained in Chapter 1 of Part 4 of the DMCC Bill largely maintain the status quo. 

The big change is the CMA’s new enforcement powers, which drastically heighten the risk for non-compliance. Under the DMCC Act, the CMA will have enhanced powers to investigate suspected infringements, issue enforcement notices and impose fines of up to 10% of worldwide turnover for infringing undertakings. We therefore expect to see an increase in enforcement action in this space going forward. 

While much of the DMCC Act is expected to apply from autumn 2024, it is less clear when the consumer protection measures will enter into force and it is worth noting that these provisions require secondary legislation to implement. A parliamentary briefing paper from earlier this year indicates that the subscription provisions will not be implemented before 2026. However, companies already complying with existing consumer laws, as well as existing guidance issued by the CMA, will put themselves in a good position to comply with these new rules. 

 

 

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spotlighton-dmccact, dmccact, consumer protection, digital transformation, it and digital, article