Consumer law | UK Regulatory Outlook October 2023
Published on 31st Oct 2023
CMA publishes response to the government's consultation on consumer-related matters | Commission launches DSA Transparency Database | Influence of NFTs and blockchain on UK consumers
Online Safety Act receives Royal Assent
On 26 October 2023, the UK government's long-awaited Online Safety Act received Royal Assent. See our Insight to find out more about what services are in scope, what obligations the Act imposes on in-scope platforms, what powers Ofcom will have as the online safety regulator, and more.
CMA publishes response to the government's consultation on consumer-related matters
The UK Competition and Markets Authority (CMA) has published its response to the Department for Business and Trade's consultation on proposed amendments to UK consumer law. The consultation closed on 15 October 2023. (See our Insight for background.)
Highlights from the CMA's response are summarised below.
The CMA supports the Digital Markets, Competition and Consumers Bill (DMCC Bill) and welcomes the work by the government in consulting further on consumer protection related matters.
In relation to drip pricing (where consumers are shown an initial prices and additional fees are imposed later in the buying process), the CMA takes view that there "should be a ban of all mandatory elements and other charges which are "optional" but which businesses can reasonably foresee most consumers would pay, or which any consumer would have to pay, even if others could avoid them". The CMA states that mandatory variable and "optional" charges should be included in the stated headline price. If there are genuinely optional extras as part of the purchasing process, these should be prominently and fully disclosed in the headline price and be accessible to consumers.
The CMA supports the government's proposals to include fake reviews in the "blacklist" of offences under the DMCC Bill. It agrees with the proposed list, with some amendments. It also considers that businesses would benefit from new guidance on their legal obligations in this area.
On subscription traps, the CMA believes that the renewal of consumers' recurring payments should be banned, unless separate and active consent is explicitly and freely given. In the CMA's view, this should be included in the DMCC Bill and made a criminal offence.
The CMA highlights that, in its view, misleading environmental claims should also be added to a list of banned practices in the DMCC Bill.
Commission launches DSA Transparency Database
Under Article 24(5) of the DSA, the Commission must set up and maintain a publicly accessible database of statements from online platforms setting out their reasons for making content moderation decisions. Online platforms are required to submit these "statements of reasons" to the database and, under Article 17(1), to the affected user. The statement of reason must be "clear and specific" and explain why a service has been restricted on the ground that it does not comply with the service's terms and conditions or is illegal.
Currently the obligation only applies to very large online platforms already designated as such by the Commission. However, from 17 February 2024, all providers of online platforms, with the exception of micro and small enterprises, will have to submit data on their content moderation decisions.
Influence of NFTs and blockchain on UK consumers
The House of Commons Culture, Media and Sport Committee has published a report in which it considers the impact of non-fungible tokens (NFTs) and blockchain on various sectors, such as the arts, intellectual property, sport and advertising, and on UK consumers.
The report highlights that complexities around these technologies may create confusion for consumers associated with intellectual property rights attached to NFTs (for example, where a consumer buys an NFT not being aware that it infringes someone's rights and unknowingly but wrongfully use the underlying asset). Due to the legal exemptions that online intermediaries hosting third party content have, known as "safe harbour" provisions, the responsibility could be put on consumers. The Committee therefore recommends that the government addresses these exemptions and introduce a code of conduct for UK-based NFT marketplaces that protects consumers, creators and sellers from infringing and fraudulent content sold on these platforms.
See Advertising and Marketing section for advertising aspects of the report.
CJEU considers that a consumer is entitled to cancel an initially free and automatically renewed subscription only once
In Verein für Konsumenteninformation v Sofatutor GmbH EU:C:2023:735, the Court of Justice of the European Union (CJEU) considered whether a consumer is entitled to cancel an automatically renewed and initially free subscription contract for services made via a distance contract only once.
The company, offering services in Austria, provided consumers with a 30-day free subscription period when they booked its services for the first time, during which period the subscription could be terminated without notice at any time. After the expiry of 30 days and if the subscription was not terminated within this timeframe, the subscription automatically renewed on a paid-for basis. The company informed consumers of the right of withdrawal when the subscription was made via a distance contract.
The CJEU was asked to interpret Article 9(1) of the Consumer Rights Directive (2011/83/EU) with regard to whether a consumer is entitled to a new right of withdrawal after a free trial subscription is converted into a standard, paid-for subscription, unless terminated either during the free trial or on the point of conversion, and when that standard subscription is subsequently renewed. In other words, the question was whether a consumer's right to withdraw is guaranteed once only, or whether they have that right each time the contract is renewed after conversion into a paid-for contract.
The CJEU noted that the right of withdrawal aims to give the consumer time to understand the characteristics of the services contract concerned to allow them to make an informed decision as to whether they wish to be contractually bound to the services provider.
Under the directive, the CJEU said, one of the essential terms of a distance contract is the total price of the goods or services that form the subject of the contract. The goods or services provider must, under Article 6(1)(e), provide the consumer with information on that total price in a clear and comprehensible manner directly before the order is placed and the contract concluded. In addition, the provider must ensure that the consumer explicitly acknowledges that they understand that placing the order implies an obligation to pay. Failure by the provider to comply with these requirements means that the consumer is not bound by the contract.
In this case, the CJEU held that the right to withdraw from a distance contract which includes a free trial subscription that is automatically extended, unless terminated, is, in principle, guaranteed only once. The exception would be if the consumer has not been informed in a clear, comprehensible and explicit manner at the time of ordering the subscription that, after the initial free period, payment will be required for an ongoing subscription.