Consumer law: New penalties are fine, but what other powers fit the Bill?

The Digital Markets, Competition and Consumers Bill's granting of power to the Competition and Markets Authority to impose financial penalties has grabbed the headlines.

The Government’s press release published alongside the Bill boasts that the CMA will be able to fine businesses up to 10% of their global turnover for mistreating customers.

The British Retail Consortium’s website warns of ‘sharper teeth’ for the CMA, cautioning that the watchdog is getting powers similar to those of the Information Commissioner’s Office (ICO).

Even The Guardian was dazzled by the prospect of major online retailers and global technology businesses facing ‘hefty’, ‘multibillion-pound’ fines.

In a follow-up to our recent overview insight into the Bill, we look at whether these headlines have actually missed those powers in the Bill which have more bite.

Is the Bill all fines?

The Bill gives the CMA power to directly impose financial penalties – and there are lots of different types and tiers of penalties which the CMA can hand out to rogue retailers.  So many in fact, that the Government has published a table summarising all of the fines.

To pick-out just a few, there is a penalty for breaching consumer protection laws of up to £300,000 or, if higher, 10% of global turnover. Then there is a penalty of up to £150,000 or, if higher, up to 5% of a business’ global turnover for breaching undertakings given to the CMA.  

As well as fixed penalties, businesses can run-up additional, taxi fare-style daily penalties for some infringements.

With pound signs dotted throughout the Bill, it is perhaps easy to see why the attention has focussed on these particular bits of ‘fine’ print.

Several strikes (and months) later and you’re out (of pocket)!

There is undoubtedly potential for businesses to face a large fine, but it is only businesses who carry-on non-compliant behaviour regardless of the CMA’s warnings that are likely to face penalties approaching the amount of those imposed by the ICO – and perhaps not for months.

Take the penalty for breaching consumer protection laws as an example. Before the CMA is able to impose a penalty it must first jump through several hoops.  

Firstly, the CMA must have reasonable grounds for suspecting that a business has been, is, or is likely to be non-compliant with consumer protection laws.  

The CMA is then likely to conduct an investigation. Only once this investigation has started and the CMA has established reasonable grounds can the CMA give the business a provisional infringement notice.

On issuing of the provisional infringement notice, the business has the chance to put forward its own side of the story by making representations to the CMA. The business also has the opportunity to minimise the risk of the CMA imposing a penalty or reduce the amount of any penalty by modifying its behaviour.  

Only once time has run-out for the business to make representations can the CMA give the business a final infringement notice. Even then, the business benefits from the safeguard of a 60-day right to appeal to the High Court.

Consumers shouldn’t, therefore, expect to see penalties imposed overnight.

What other powers fit the Bill?

Two new CMA powers that have not attracted attention are the options of either applying to the court for an online interface order or issuing an online interface notice direct to businesses. These powers are available where the CMA believes a business has engaged, is engaging or is likely to engage in a relevant infringement.  

Online interface notices are take-down demands that the CMA can use to force businesses to shut their website, remove or modify certain online content, show warning notices, or even seize their domain name.  

The CMA’s power to issue online interface notices is very limited. There must be no other available, ‘wholly effective’ means under the Bill of stopping or prohibiting the business’s non-compliance. The CMA must also be satisfied that the notice is necessary to avoid the risk of serious harm to the collective interests of consumers.

It seems likely that the CMA will only be able to issue an online interface notice as a last resort where a business’ non-compliance requires immediate and urgent action to stop a widespread consumer rip-off.

The CMA will normally have to apply to the court for an online interface order.  As such, any bite in these powers still sits with the courts, rather than the watchdog.  

Should businesses be prepared to have their online shops shuttered?

Businesses may be right to feel concerned about how the Bill could impact their day-to-day online operations.

However, it seems improbable that the CMA will apply for orders to address individual acts of non-compliance based on a handful of consumer complaints, or to prevent online retailers trading under unfair terms and conditions.

The CMA is more likely to raise the threat of such orders as a way of compelling non-compliant businesses to change their behaviour before actually applying for the order or imposing a financial penalty.

Unfair commercial practices of the type banned under the Consumer Protection from Unfair Trading Regulations 2008 are an area of focus. Could online retailers face orders demanding removal of ‘lots of people are looking at this’ type-messages where these are perceived to pressurise consumers?

The CMA may also apply for online interface orders as part of its focus on “problem” sectors. Could we see the CMA use such orders to demand that FMCG and fashion businesses take-down misleading environmental claims as part of a clamp-down on “greenwashing”?

Now is the time for businesses dealing with consumers online to take-stock. Businesses wanting to minimise risk should review their entire online presence, taking a particularly close look at claims made on their website, in marketing emails, or on social media, as well as their online customer sales journey.  

The Bill’s message is clear: get your (online) shop in order!


This information is for general information purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given. Please contact us for specific advice on your circumstances. © Shoosmiths LLP 2024.



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