What is it?
The new Digital Markets, Competition and Consumers Bill (the "Bill") was introduced by the UK Government on 25 April 2023 and follows the Competition and Markets Authority ("CMA") study into online platforms and digital advertising (published in July 2020). The CMA recommended, among other things, a new regulatory regime for online platforms as well as other steps to address the dominance of certain big tech companies. In response, the Government consulted on a new pro-competition and pro-consumer regime for digital markets targeted at a small number of dominant firms.
The Bill aims to protect and promote competition particularly between big tech firms that currently dominate digital markets and to enhance consumer protection by tackling issues such as fake online reviews and subscription traps (where consumers face difficulty in cancelling an ongoing contract). These issues affect not just consumers, but also businesses, in particular SMEs, where fake reviews can cause lasting reputational damage.
The principles of "transparency" and "fairness" have always been key in underpinning UK consumer law. The changing way in which consumers interact with businesses online has made it easier for consumers to be misled and taken advantage of, whether or not this is intended by the business. As a result, the law has become outdated and needs to be changed to keep up with the evolving landscape. The Bill introduces significant fining powers and businesses that are affected will need to take these seriously when considering how they engage with consumers online.
These changes are subject to Parliamentary approval, following which the Government intends for them to come into effect as soon as possible.
What key changes are proposed by the Bill?
Empowering the Digital Markets Unit ("DMU")
The DMU (which operates within the CMA) will be given powers to address the 'excessive dominance' of certain big tech companies, with a focus on protecting and promoting new entry,expansion and innovation, and providing more choice to consumers.
Tailored rules for firms with strategic market status
The CMA will have the power to investigate and designate businesses with "strategic market status". Businesses designated with strategic market status will be subject to specific obligations and rules for certain activities, in order to facilitate early intervention in potentially anti-competitive conduct and facilitate increased choice and transparency for customers.
New measures to tackle fake reviews
These will require businesses to take reasonable steps to verify the authenticity of reviewers.
New measures to address subscription traps
These will ensure customers can easily opt out of subscriptions "in a straightforward, cost-effective, and timely way" by requiring businesses to provide clear information, issue reminders when free trials or introductory offers are ending, and facilitate straightforward, cost-effective and timely contract exits. This aligns with investigations previously undertaken by the CMA and the Advertising Standards Authority ("ASA") on so-called 'dark patterns'.
Enhanced powers for the CMA
The CMA will be able to directly enforce consumer law without lengthy court processes. The penalties for breaching consumer law will be up to 10% of a company's global turnover (depending on the type and severity of the breach).
What can you do to prepare?
Competition: Businesses classed as having 'strategic market status' must be prepared, if required by the DMU, to provide data to rival search engines, or to increase the transparency of how their app store or marketplace review systems work. Such businesses will also be subject to lower merger control thresholds and will be obliged to report certain acquisitions and other activities to the CMA.
Reviews: Businesses should check their customer review processes and in particular, how they engage with individuals who they pay to test and promote their products and services. Reviews in general should be genuine and should be checked by the business they relate to before they are posted. Businesses should never commission an individual to post a fake review of a product or service.
Subscriptions: Consumers need to be reminded about free trials or introductory services that are coming to an end. Businesses should look at their notification processes and terms and conditions, to ensure they allow consumers an easy, cost-effective and quick way to end a subscription contract (that does not unfairly penalise them).