New consumer rights laws are coming this year: what you need to know

Consumer-facing businesses which are found to be misleading customers will face harsher penalties, under new laws passed by the UK parliament yesterday. 

The Digital Markets, Competition and Consumers Bill (DMCC) is a set of legislation that gives the Competition and Markets Authority (CMA) greater powers to clamp down on exploitative trading practices such as drip pricing, fake reviews and subscription ‘traps’.

Parliament rushed to approve the legislation before it was dissolved ahead of the upcoming election. The Bill is expected to be fully ratified this autumn. Here’s what businesses need to know.

What is the DMCC bill and what does it mean for businesses?

The government first announced the DMCC bill back in 2022. In its initial iteration, the bill largely focused on forcing large technology firms with designated “Strategic Market Status” to conform to new codes of conduct. 

However, the final draft – published in April 2023 – has also seen changes to a number of consumer protection areas that will impact a broad range of business models. These are:

1. Drip pricing

During the run up to the DMCC Bill’s passing, the issue of drip pricing (where buyers are misled by an affordable upfront price before being ‘drip fed’ extra charges later in the buying process) has been widely debated. 

It is rife in specific sectors, such as aviation, where Brits are now used to seeing airlines add seemingly arbitrary fees for seat bookings, or for additional leg room when planning a holiday.

But once the DMCC act becomes law, companies will be required to set out the total charge – including product price, hidden fees, and taxes – that shoppers will incur on a purchase. 

Some sum totals cannot be reasonably calculated in advance. In these cases, the business must find other ways to clearly explain their pricing structure and what it means for customers.

2. Subscription contract ‘traps’

The DMCC also plans to stamp down on sign-up deals that ‘trap’ customers into potentially expensive subscription agreements that are hard to cancel. Among the measures introduced:

• Extended ‘cooling off’ period – after they sign a contract, consumers currently have a 14 day cooling-off period when they can cancel for a full refund. The DMCC Bill will extend this to cover contract renewal windows
• Reminders – businesses must inform consumers when key dates are approaching. Specifically if a payment is due, a contract might auto-renew, or a free trial is ending
• Simplified exits – the DMCC Bill states that consumers should be entitled to cancel a contract in a single communication. The instructions for how to do so must also be easy to find, such as published in an online knowledge base

3. Fake reviews

Another practice that will now be considered unfair is the publication of false reviews. One government report suggests that up to 11% of reviews on UK ecommerce sites come from dummy accounts. Social media was found to be the most common home for fake reviews.

The DMCC Bill means that business owners are responsible for taking measures to discourage, block, or remove customer testimonials they believe to be untrue. 

SMEs should be aware that online marketplaces, like Amazon and eBay, will also likely step up measures to remove fake reviews as a result of the law change.

Global consumer review website, Trustpilot, last week announced it removed around 3.3m fake reviews in 2023, representing 6% of all reviews on the site.

What is the penalty for non-compliance?

Failure to follow the new DMCC guidance will now be considered unfair commercial practice, similar to the EU’s Consumer Protection from Unfair Trading Regulations 2008 act.

Breaches will be considered a civil liability, not criminal. However, the DMCC Bill means they will still result in a hefty fine by the CMA — up to 10% of a company’s annual turnover. 

For small businesses, this amount could potentially be ruinous. Likely, this penalty level will be reserved for big business offenders.

For example, global ticketing platform Ticketmaster was recently revealed in a Which? study to bump up its transaction fees by almost a quarter, using drip pricing.

Businesses with consumer contracts who may be impacted, such as ecommerce firms, should review their pricing and marketing strategies to stay compliant with the DMCC Bill. 

The new laws could even be useful guidance for strengthening customer relationships. The DMCC Bill is designed to protect consumers and build trust between them and brands; an objective that can only be beneficial for businesses in the long-run.