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Consumer law reform – what may be coming and its relevance to the betting and gaming sector

Posted on 13 January 2022

The key provisions of UK consumer law can be found in the Consumer Rights Act 2015, the Consumer Protection from Unfair Trading Regulations 2008 and the Consumer Protection Act 2007. These laws apply to gambling operators licensed by the Gambling Commission of Great Britain in addition to the requirements of licence condition 7.1.1 of the Gambling Commission's licence conditions and codes of practice (LCCP). They also apply to other businesses in the betting and gaming sector such as affiliate marketing businesses.

Amongst other things, these laws seek to protect consumers from unfair terms and practices. To do so, they significantly curtail the principle of freedom of contract when it comes to business to consumer (B2C) contracts. They are enforced by the Competition and Markets Authority (CMA) pursuant to powers derived under the Enterprise Act 2003 (see further below).

In July last year, the department for Business, Energy, Innovation and Skills (BEIS) issued a consultation document setting out a number of potential reforms to consumer and competition law. The proposed reforms are significant, and would, if implemented, be relevant to all betting and gaming businesses with customers in the UK. (The competition law reforms are outside the scope of this article). 

New enforcement powers

The Enterprise Act currently gives the CMA the power to take decisions relating to competition law infringements and to fine offending parties up to 10% of their global turnover.  As regards consumer law, however, local trading standards officers and the CMA have only investigatory powers. It is the courts that have the power to issue formal decisions and to levy fines.   The process of bringing legal proceedings, and the associated costs, are seen as a material deterrent to enforcement action being taken.  In most cases the CMA seeks to use warning letters and to negotiate undertakings (such as those provided to the CMA by a number of online gambling operators during 2018) rather than take companies to court. By way of example, during the COVID crisis, the CMA received over 23,000 complaints relating to refunds for package holidays that had been cancelled.  Many tens of millions of pounds were at stake.  While undertakings were negotiated by the CMA with a number of tour operators, only in one case have legal proceedings been commenced by the CMA.

Most notably, the proposed reforms seek to give the CMA the power to make decisions relating to consumer law infringements, as well as to fine companies (with proposed thresholds being in line with its competition law powers – i.e. up to 10% of the offending party's global turnover).  New powers are also proposed to allow the CMA to issue interim decisions. This would mean that operators could be required to stop certain conduct or agreements pending the CMA's consideration of all the issues and a final decision being taken.  The proposals also include a right for the CMA to impose fines for failure to comply with information requests.  The CMA would be able to impose such administrative penalty as it considered appropriate, subject to the statutory maxima specified by order of the Secretary of State. The current maxima specified by the Competition and Markets Authority (Penalties) Order 2014 are as follows:

  • £30,000, fixed amount
  • £15,000 (daily rate), and
  • £30,000 and £15,000 (fixed amount and daily rate together).

These proposed powers would effectively accelerate the enforcement process by allowing for interim decision making and the threat of fines for companies not responding diligently to the CMA's requests for information.  

Proposed reforms to the use of subscription contracts

The consultation highlighted the increased use of subscription contracts in the UK, and concerns that consumers may inadvertently be locked into rolling subscriptions.  BEIS has therefore suggested proposals to tackle ‘subscription traps’, including the imposition of onerous transparency requirements, a prohibition on auto-renewing products, and requirements to make website engineering changes that facilitate, for example, automated refund mechanisms.

Businesses that rely on auto-renewals for their revenue models will need to review carefully any legislative changes that flow from the consultation.

Tackling fake reviews

The other main area of substantive concern for the CMA is that of ‘fake reviews’, especially where these are the result of payments being made to persons as an incentive to make the review.  Such reviews are undesirable for both businesses and consumers, and the consultation proposes that measures be introduced to make such reviews a criminal offence.   The challenge, however, will be to define a ‘fake consumer review’ in a way that does not prohibit legitimate paid-for endorsements or reviews by experts and influencers.

Conclusion and next steps

The COVID crisis has emphasised the importance of consumer law in governing B2C relationships and the CMA has voiced strong support for BEIS's proposals. The consultation closed on 1 October 2021 and BEIS is currently assessing the responses. The next step will be for BEIS to propose legislation for Government to introduce to Parliament. This is likely to be a relatively lengthy process and any resulting changes are unlikely to come into force in the short term. However, the tone of the consultation and its proposals is a timely reminder of the importance of ensuring that terms and conditions of use, game rules, terms and conditions applicable to bonuses and promotions and subscription terms are all reviewed regularly to ensure compliance with consumer protection laws.

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