Action to halt online rip-offs and fake reviews
Kwasi Kwarteng: public needs confidence
Measures to shield the public from rip-off subscription services and fake reviews have been unveiled by the UK Business Secretary Kwasi Kwarteng.
The Westminster Government will change the law so prepayment schemes like Christmas savings clubs must safeguard customers’ money, protecting consumers’ cash as they save for the holidays.
The change will prevent a repeat of the Farepak scandal, where tens of thousands of people, many on low incomes, lost their Christmas savings when the company went bust.
For the used car and home improvement sectors, where consumers often make large, important one-off purchases, the Government will make it mandatory for businesses to take part in arbitration or mediation where disputes arise over a transaction.
This means both sides won’t get dragged through the courts and levels the playing field for decent businesses who are doing the right thing.
The Government is also clamping down on subscription traps by requiring businesses to make it clear exactly what consumers are signing up for and letting them cancel easily, to ensure people can spend their hard-earned cash with confidence.
The consumer catfish behind bogus online ratings will also be targeted by rules that make it automatically illegal to pay someone to write, or host, a fake review.
The Government will help regulators stamp out other dodgy tactics used to dupe online shoppers.
These include “dark patterns” that manipulate consumers into spending more than they wanted to, and “sludges”, negative nudges such as when businesses pay to have their product feature highly on a trader’s website while hiding the fact they paid for it.
Business Secretary Kwasi Kwarteng said: “The UK’s economic recovery relies on the strength of our open markets and consumers’ faith in them.
“By delivering on our commitment to bolster our competition regime, we’re giving businesses confidence that they’re competing on fair terms, and the public confidence they’re getting a good deal.”
The proposals come in the new consultation on Reforming Competition and Consumer Policy, which delivers on the Government’s manifesto commitment to “give the Competition and Markets Authority enhanced powers to tackle consumer rip-offs and bad business practices.”
Tough penalties for non-compliance are being put forward, with new powers for the CMA and similar enforcers to hit unscrupulous traders who breach consumer law with fines of up to 10% of their global turnover, and civil fines for businesses who refuse or give misleading information to enforcers.
UK Government is also considering several options – including introducing financial penalties – when firms breach the commitments given to enforcers that they will change their ways.
To speed up processes, the CMA will also be able to enforce consumer law directly rather than having to go through a court process that can take many months or even years – meaning consumers are protected more quickly.
Consumer and Small Business Minister Paul Scully: “Business is built on trust. When consumers part with their hard-earned cash, they’ve got every right to expect they’ll get their money’s worth. Cowboy builders aren’t welcome in 21st century Britain.
“As we build back fairer, we will protect the UK public from being hoodwinked and help small businesses thrive.”
The UK Government is also proposing a package of reforms to ensure the UK has a “best in class” competition regime in line with the ambition set out in the Plan for Growth. The plans would allow the CMA to:
- Impose stronger penalties for companies that don’t comply with its investigations or orders, with new powers for fixed penalties of up to 5% of annual turnover and additional daily penalties up to 5% of daily turnover while non-compliance continues
- Disqualify company directors who make false declarations to the regulator
- Accept voluntary binding commitments from businesses at any stage in its investigations, rather than having to wait till the end – leading to quicker outcomes and reduced costs for both businesses and the regulator
- Block a wider range of harmful mergers, including so-called “killer acquisitions” where big businesses snap up prospective rivals before they can launch new services or products
UK Government is committed to a competition regime which is efficient and predictable. Harms to consumers should be remedied quickly, and costs and uncertainty for business should be reduced.
On mergers, to keep the burden on smaller businesses to a minimum, Government proposes that mergers between small businesses – where each party’s turnover is less than £10m – be removed from the CMA’s merger control altogether.
Going forward, the UK Government will provide the CMA with more regular steers on which areas of the economy to focus its investigations on. The CMA will also need to produce regular ‘State of Competition’ reports looking at the vibrancy of competition in the UK’s markets.
The government has today also launched a consultation seeking views on the objectives and powers of the Digital Market Authority.
Proposals include placing a mandatory code of conduct on tech giants with deep-rooted market power to drive up competition and new powers to issue fines of up to 10 per cent of turnover for serious breaches.
The proposed new measures are expected to help British start-ups and scaleups compete more fairly against those big tech firms with powerful positions in the market.