Proposals have been published at both an EU and UK level to radically strengthen the enforcement powers of industry regulators in a bid to champion consumer rights.
The ‘New Deal for Consumers’ legislative initiative comes in response to concerns that consumer law is being poorly enforced and that sanctions are inadequate.
What is being proposed?
In the UK, larger fines and disqualification for company directors form part of a new set of proposals from the competition watchdog, the Competition and Markets Authority (CMA).
The government has also announced proposals under its modernising consumer markets green paper to enhance enforcement powers of civil courts to fine businesses for breaches of consumer law up to a maximum of 10% of a company’s worldwide turnover. The consultation remains open, meaning it will be some time before any new or enhanced enforcement powers will be made available to regulators.
In Europe, the EU is proposing fines of up to 4% of worldwide turnover for breaches of EU rules relating to unfair commercial practices, consumer rights and on unfair consumer contract terms.
The draft legislation would require online marketplaces to be more transparent and will also enhance consumers’ rights to remedies whether they are harmed by unfair commercial practices. Consumers would also obtain new protections in circumstances where they access digital services that are ‘free’, including where they provide personal data in return for access to services and not money.
The powers, first introduced by the European Commission in 2018, are being likened to the GDPR penalties introduced in 2018. While backed by the Council of Minister’s Permanent Representatives Committee (Coreper), they remain in draft form, awaiting necessary approval by the Council of Ministers and the European Parliament. According to the Council, the new rules could be adopted at first reading in the coming weeks.
The enhanced powers and regulatory scrutiny take specific aim at online transactions and in particular the need to better and more clearly inform consumers as to whether contracts are concluded with a trader or an individual, whether consumer protection legislation applies and which trader (third party supplier or online marketplace) is responsible for ensuring consumer rights related to the contract.
Criticism was also levied toward online marketplaces, comparison tools, app stores and search engines for unclear or misleading practices about how items are ranked on websites. The draft directive obliges such digital applications to indicate to their users where third parties pay for higher ranking or to be included in the list of results.