Overview
The UK's competition watchdog, the Competition and Markets Authority (CMA), has rarely been out of the news in recent months, mostly in relation to criticism of its approach to merger control, the decision by the UK Government to replace its Chair and the agency's promise in turn to enact root-and-branch reform. The CMA is currently engaged in a flurry of formal and informal consultations (including in relation to its 'strategic steer,' a new approach to international mergers and call-ins, a promised new 'Mergers Charter' and its digital markets powers), in addition to a painful redundancy and reorganization program that is expected to significantly contract available resourcing, following a reported 10% budget overspend in financial year 2023-2024.
A significant piece of new legislation, the Digital Markets, Competition and Consumers Act 2024 (or DMCCA), came into force in January 2025 and gave the CMA additional powers in relation to both merger control (including a new single-party test that will allow the CMA to investigate mergers where no competitive overlap arises between acquirer and target, further expanding the CMA's jurisdiction) and digital markets (where the CMA has already launched two investigations into mobile ecosystems, focused on Apple and Google, and online search and search advertising, focused on Google).
However, the DMCCA also grants the CMA sweeping new consumer enforcement powers, which are expected to come into force in April 2025.
These include:
- fines for breaches of relevant legislation of up to £300,000 or 10% of global turnover (whichever is higher), bringing consumer protection rules into line with the CMA's fining powers under the competition regime (with aggravating factors including adverse impacts on vulnerable consumers);
- one-off fines for breaches of procedural rules of up to £30,000 or 1% of global turnover (whichever is higher) and potentially up to £150,000 or 5% of global turnover (whichever is higher) for the most egregious breaches of procedure, as well as periodic fines for ongoing breaches;
- fines on company directors or senior managers of up to £300,000;
- direct civil enforcement by the CMA and its partners (Local Authority Trading Standards Services, the Office of Communications, the Civil Aviation Authority, and other sector regulators) of breaches of consumer law and undertakings, without the need to go to Court (although that remains an option);
- requiring businesses to redress affected consumers directly via ‘enhanced consumer measures’ and give consumers better information (including a requirement to provide additional pre-contract information and reminder notices in relation to subscription contracts);
- a complete ban on fake reviews; and
- a ban on 'drip pricing' of unavoidable fees.
The CMA's final guidance (expected in April) will also include specific examples of unfair commercial practices (with case studies and examples). It will also further specify the procedure for companies to engage and, if necessary, to appeal decisions by the CMA in this space as well as the process for agreeing commitments and discounts for early settlement. Finally, it will confirm the CMA's approach to calculating penalties (the draft guidance set out for starting points depending on the severity of harm).
Our view
While consumer protection has historically occupied a back seat compared to the CMA's enforcement of competition and merger control rules, given the current political climate and particularly the push for high impact, less speculative enforcement, it is likely that we will see greater use of these tools. This is not least given that the fines (and therefore the opportunity for deterrence) are greatly enhanced and the enforcement procedure – which will now allow the CMA to take direct action without going to Court – may allow for faster outcomes than procedures under the Competition Act 1998 or the Digital Markets Unit (consistent with the CMA's commitment to 'Pace' as part of the '4 Ps').
Of particular concern for international businesses, however, will be the CMA's ability to impose requirements (and fines) not only on the UK arm of a business but on 'interconnected bodies corporate.' We will be looking for greater clarity in the final guidance documents published next month, including in light of recent commitments by the CMA to 'proportionality' (another of the '4 Ps'); in particular, to focus on UK-specific issues and not to impede the functioning of global companies in other jurisdictions.
In terms of sectors likely to be affected by the new powers, the Chief Executive of the CMA, Sarah Cardell, committed in a speech to the tech community on March 10 to publishing its enforcement priorities by April.
We expect some or all of the following to be priority areas:
- Airline tickets (including sales through direct channels and via intermediaries)
- Gym memberships (i.e., involving fixed minimum-term contracts)
- Hotel reservations (whether sold direct or via intermediaries)
- Live events tickets (where investigations are already ongoing)
- Online products and services, which use timers or other methods to induce quick consumer decisions, and/or which are disproportionately relied upon by vulnerable consumer groups
- Recidivist firms and conduct (i.e., behavior by companies which the CMA has already taken enforcement action against or practices by other companies that the CMA has already indicated as being undesirable, which could include formal action as well as past warning letters).
The CMA has also indicated a more general focus on the potential harms arising from Artificial Intelligence and in relation to green-washing, themes which could affect a wide-range of sectors.
On the flip side, the rules on subscription contracts will not apply where other regulations are in force (for example, in relation to insurance products and contracts regulated by Ofcom).
Please do not hesitate to reach out to our Antitrust team in London regarding any queries in relation to the CMA's enforcement of consumer protection rules, including what steps businesses can take to mitigate the risk of enforcement action under the new regime.
