Whitestone Looks at Consumer Law Reform

Following numerous consultations, the UK Government plans to reform consumer law. These plans consist of giving regulators powers to impose fines of up to 10% of global turnover in the case of a breach of consumer legislations. Such reform – if actioned – is predicted to ‘toughen’ the regulatory environment in the consumer business sector.[1]

Problems lie upon whether all this talk of reform will be actioned, or whether weak enforcement from the consumer and sectoral regulators will leave this reform redundant. If a regulating authority, such as the Competition and Markets Authority (CMA) or the Financial Conduct Authority (FCA) believe a business to be infringing consumer law, they have no powers to compel the business to change its behaviour – such authorities can merely advise, and hope that businesses choose to act in accordance.

Despite courts withholding the power to order businesses to make such changes, the process of taking businesses to court is “lengthy, complex and costly” with no financial sanctions for civil breaches of consumer protection law, even if the business loses the case as seen in 2008 where the Office of Fair Trading took estate agent Foxtons to court over unfair provisions in its agreements with consumer landlords.[2] Currently, the CMA also has to go to court if it considers a business to have failed to comply with its investigatory powers under consumer law.[3]

These detrimental inconveniences have ultimately left regulators not wanting to take businesses to court, but instead attempting to negotiate a settlement with businesses. Such settlements, however, are not directly enforceable. In these circumstances, the regulators have no other option but to bring court proceedings against breaching businesses, leaving them at a major setback.

Notwithstanding these issues, the proposed reform promises to correlate with the powers of the CMA and other regulators in order to enforce the law in this area. Rather than having to go to court, regulators will have the powers to investigate and reach their own decision which will be immediately binding on the business in question, including an order to cease the illegal behaviour or a monetary penalty of up to 10% of the businesses global turnover to not only punish offenders but deter other businesses from engaging in such conduct. Furthermore, if the regulator believe that a business has failed to cooperate or provide sufficient information whilst under investigation, it will be entitled to impose a civil penalty of up to 1% of annual turnover, with an additional daily penalty of up to 5% of daily turnover in the case of continued non-compliance. Businesses can, nonetheless, appeal against such decisions by regulators.

These reforms will remove the necessity of court proceedings against breaching businesses by strengthening the power of the regulators, provided the Government legislates to implement this new regime.

When these reforms will ultimately come into force is unknown, though the deadline for responding to the consultation is 1 October 2021, preceding Government analysis of – and response to – any feedback and finding Parliamentary time for legislation to enact the reforms. Realistically, we think that the earliest the reform will be brought into force would now be 2023.

[1] https://www.lexology.com/library/detail.aspx?g=4b421dbf-c2ef-4f16-bac8-156695ea7347&utm_source=Lexology+Daily+Newsfeed&utm_medium=HTML+email+-+Body+-+General+section&utm_campaign=IPBA+subscriber+daily+feed&utm_content=Lexology+Daily+Newsfeed+2021-08-24&utm_term=

[2] https://www.gov.uk/cma-cases/foxtons-hidden-fees-in-lettings-agreements-with-consumer-landlords

[3] https://www.gov.uk/government/news/norton-extends-refund-rights-after-cma-action

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