Consumer Protection: UK grants CMA online enforcement order powers

By Victoria Hobbs, Matthew Vance

05-2020

Businesses operating in the Retail & Consumer sphere may not be aware that the UK government has recently laid before Parliament an EU-derived Regulation which grants the Competition and Markets Authority (CMA) new powers to enforce consumer protections in the online sphere. Many of the UK’s consumer protection laws derive from EU legislation which, in addition to setting out EU-wide protections that are available to consumers, also provide for an EU-wide enforcement strategy when those laws are broken.

These protections cover all consumers and apply to distance selling, unfair contract terms, e-commerce, unfair commercial practices, comparative advertising and include package holidays, timeshares and passenger rights.  These protections were strengthened by the EU as a result of the Consumer Protection Co-Operation Regulation ((EU) 2017/2394) (CPC Regulation) which came into force in all EU member states on 20 January 2020, just days before Brexit, and as a result the UK now has to comply with the CPC Regulation  until the end of the transition period. It is then expected that the UK will revoke it.

The Consumer Protection (Enforcement) (Amendment etc.) Regulations 2020 (SI 2020/484) (Regulations) were laid before Parliament on 5 May, 2020. The Regulations enshrine in UK domestic law those parts of the CPC Regulation which grant new powers to the CMA to enforce consumer protection laws in the digital sphere. Unless opposed within a 50-day period, the Regulations will become law and enter into force on 2 June 2020. They do not have retrospective effect.

What do the Regulations do?

The Regulations grant and govern the CMA's new power to apply to the High Court for an online interface order or an interim online interface order, where it "thinks that there has been or is likely to be a Community infringement", which currently means an infringement of consumer law in any EEA Member State. The application can be made against the alleged infringer, or remarkably, "against another person", which could include anyone.

If the application is successful, the court may direct the person against whom it is made to do one or more of the following:

  • remove content from or modify content on an online interface;
  • disable or restrict access to an online interface;
  • display a warning to consumers accessing an online interface;
  • delete a fully qualified domain name and take any steps necessary to facilitate the registration of that domain name by the CMA.

"Online interface" is given a wide definition and captures "any software", including a website (or part thereof) or an application, that is operated by or on behalf of a trader, and which serves to give consumers access to the trader's goods and services.

What is the impact on consumers and businesses?

The online interface order mechanism does not introduce any direct remedies for consumers, and so its impact will mainly depend on the responsiveness of the CMA to consumer complaints and pro-activity in using these powers.

That being said, the potential powers of the CMA are remarkably wide, and do mark a significant step up in its enforcement abilities in a sphere which has been notoriously difficult to police in the past. Of note is the CMA's power to act on anticipated or "likely" infringements, to seize domain names, and to direct orders against essentially any person, which could extend the reach of online interface orders to any number of 'innocent' online intermediaries such as third-party ecommerce platforms, app stores or domain name registrars. Depending on how the CMA (and the courts) wields these tools, consumers could see a real increase in their protection in digital transactions. Digital businesses, on the other hand, would be right to feel concerned about how the Regulations will affect them; and if they will end up bearing the brunt of carrying out the online enforcement orders, and so be forced to divert resources towards dealing with yet another new front in regulatory compliance.

However, it remains to be seen how the CMA will choose to exercise these powers. It has typically focussed on certain sectors for enforcement action rather than individual and isolated bad actions, and so the effects of the Regulations on consumers is likely to be shaped by the CMA's own priorities, which whilst addressing some consumer concerns, are bound to leave out others.

Brexit implications

Under the UK withdrawal legislation, the new CPC Regulation will automatically become part of UK domestic law at the end of the transition period. As this would leave EU Member States with unilateral rights in the UK and so be directly contrary to Government policy, it is expected that the Government will revoke the CPC Regulation before the transition period ends. The adoption of the Regulations is therefore likely to be a preliminary step in this process, ensuring that the desired parts of the CPC Regulations are retained in UK domestic law, and so clearing the way for the rest to be discarded.

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