CMA consults on draft guidance for unfair commercial practices
The UK’s consumer protection landscape is poised for significant change with the introduction of the Digital Markets, Competition and Consumers Act 2024 (the Act). Among other reforms, the Act will replace the Consumer Protection from Unfair Trading Regulations 2008, and sets out 32 unfair commercial practices that are expressly prohibited.
The changes aim to enhance fairness and clarity for consumers while setting clear expectations for businesses. For more details on the changes brought about by the Act, please see our recent article here.
The Competition and Markets Authority (CMA) has now launched draft guidance outlining the unfair commercial practices provisions under the Act. The guidance is currently open for consultation, with a closing date of 22 January 2025. For businesses, this is an opportunity to understand and prepare for upcoming changes in consumer protection regulations and potentially to provide feedback on the draft guidance.
In this update we pick out a couple of key points from the guidance for comment.
Fake consumer reviews
The Act explicitly addresses unfair commercial practices by prohibiting the use of fake or misleading consumer reviews.
The draft guidance confirms that a consumer review can take various forms, such as text, speech or graphic representations like a star rating. Fake reviews are those which appear to be, but are not, based on a genuine experience and can be positive or negative, whereas misleading reviews may conceal that they have been incentivised.
The Act does not prohibit incentivised reviews entirely; however, businesses must comply with strict conditions. Transparency is paramount and consumers must be informed about any incentives that have been provided.
The draft guidance states that businesses must implement measures to detect and prevent fake or concealed incentivised reviews. The CMA sets minimum expectations for all companies to:
- Publish a clear policy banning fake reviews and setting out the business’s approach to incentivised reviews. Where incentivised reviews are not allowed, the policy should state this clearly; where they are allowed, the policy should require that incentives are clearly and prominently disclosed.
- Conduct regular risk assessments to assess the risk that consumers may encounter fake or misleading reviews and identify measures to address risks effectively.
- Where there is a risk of false or misleading reviews, businesses should take reasonable and proportionate proactive steps to detect, investigate and mitigate against them. This should include appropriate actions, such as sanctions, to be taken in response.
These obligations apply regardless of a business’s size and resources. The draft guidance confirms that what is reasonable and proportionate will depend on the circumstances of each case and on the business’s needs, as identified through risk assessments.
Smaller businesses must still demonstrate a commitment to these standards, even if their approach is scaled to fit their capabilities. For example, clear rules as to who can submit a review should be easy enough for any business to implement. Reviewers could be required to provide identifying information and/or to have an account if leaving a review online, or to verify that they have used or purchased the product/service in question.
Beyond this, businesses may choose to monitor and keep records of review submissions to spot patterns of behaviour. They may also use automated software designed to identify banned reviews and spot anomalies or other patterns that may be indicative of banned reviews.
Drip pricing
The Act also targets drip pricing, which occurs when consumers are shown an initial price for a good or service, with additional fees revealed (or “dripped”) later in the checkout process. This misleading approach is a clear example of unfair commercial practices, as it prevents consumers from understanding the true cost upfront.
Under the draft guidance, all pricing information must be provided clearly, in a timely manner and in such a way that the consumer is likely to see it. Businesses must clearly display the total price for any product or service, including any mandatory fees, taxes and charges.
For example, a gym advertising a membership at £22 per month for six months must clearly state that the total cost is £132. If a business is selling tickets for an event, any mandatory booking or service fees must be included in the ticket price displayed. For instance, if the ticket price is £50 but a £5 booking fee applies, the advertised price must state £55.
Genuinely optional goods or services offered alongside a product, such as an upgrade or additional (but not necessary) feature, can be listed separately provided the consumer can easily avoid buying unwanted goods or services. If the additional goods or services are not genuinely optional, these additional costs must be reflected in the headline price. Any delivery fees must also be included in the headline price if a collection option is unavailable.
Where the total price cannot be calculated in advance, such as for products sold by weight, length, time or distance, businesses must provide clear information on how the total price will be calculated. This information must be displayed as prominently as the headline price, enabling consumers to determine the total cost.
In situations where space constraints prevent detailed price information on labels, businesses are now expected to take alternative steps to communicate this information effectively. When full details cannot feasibly be provided, the total price should be readily accessible to the consumer as quickly and easily as possible.
What does the new guidance mean for you?
With the Act expected to come into force in April, businesses must act now to ensure compliance with the new requirements and mitigate unfair commercial practices. Failure to do so could result in a substantial fine of up to £300,000 or 10% of global turnover, whichever is higher.
This will involve introducing company policies and procedures regarding reviews and pricing to comply with the new standards. Those with existing policies should review them and ensure that they meet the above expectations.
What can we do to help?
If you need advice on any of the issues raised in this article, including assistance with the new required policies, please contact either James Sarjantson on 0113 201 0401 – ku.oc1738867418.fcl@1738867418nostn1738867418ajras1738867418j1738867418 or Thomas Taylor on 0113 204 0407 – ku.oc1738867418.fcl@1738867418rolya1738867418tt1738867418.