Clifford Chance

New UK legislation raises the stakes for corporates as regards consumer protection law. It replaces the previously weak enforcement system with a robust consumer protection regime involving substantial fines.  This tougher regime makes it essential for businesses selling to UK consumers to ensure compliance. 

The regime will safeguard fair-dealing businesses by acting as a strong deterrent against rivals seeking to gain competitive advantage by engaging in unethical industry practices towards consumers. There is a route for reporting competitors' misconduct to the UK's Competition and Markets Authority, the CMA.

For corporate boards, the new risk of substantial fines for infringements means that consumer protection compliance becomes, for the first time, at least as important a risk management issue as compliance with antitrust (competition) and data protection laws.

Where it finds an infringement, the CMA will be able to issue legally binding orders requiring companies to alter their business practices and impose fines of up to 10% of global group turnover. This is on par with penalties for antitrust/competition law infringements and significantly higher than the maximum fines for data protection law breaches. No less damaging is the negative publicity associated with findings that customers have been "misled" or "ripped off". CMA investigations can be protracted and demand diversion of management time.

There has been significant pressure and lobbying for the tough sanctions that will soon be available. Therefore, there is an expectation that the CMA will use its new powers swiftly to address illegal practices such as false discounts, drip pricing and fake online reviews.

Investigations by the CMA or local authority Trading Standards departments are  likely to lead to consumers seeking redress through private litigation, with support from consumer organisations or watchdogs. As a result, we expect the emergence of related private litigation and potentially even collective claims. The latter could become a real possibility if claimant firms succeed in their lobbying efforts to expand the Competition Appeal Tribunal's remit to hear consumer class actions. 

Businesses selling goods or services to UK consumers should proactively prepare for the new regime by introducing effective risk management measures in the run-up to April 2025. Measures may include establishing compliance programmes and training for senior management and sales and marketing staff, and conducting internal due diligence and audits, seeking legal advice where issues arise.  "Mystery shopping" exercises at random stores or online may also help to identify areas of risk.