The government estimates that UK households are being ripped off to the tune of £1,000 per year. This week, they have announced steps to counter this which put additional obligations on businesses. Here, James Corlett discusses the new laws surrounding fake reviews and subscription traps, and how the Competition and Market Authority will enforce consumer law with their new powers.

Enhanced powers have been given to regulators to crack down on two main areas:

• Fake Reviews
• Subscription Traps

The proposals would make it “clearly illegal” to pay for the writing or hosting of fake online reviews with new powers for the CMA to fine businesses up-to 10% of global turnover (or £300,000 in the case of individual traders) for breaches.

Fake Reviews

The new law will prevent businesses hosting consumer reviews without taking ‘reasonable steps’ to check they are genuine it will also prohibit commissioning somebody to write or submit a fake review or to offer or advertise to provide fake reviews. business minister Paul Scully stated that the proposals will bring an end to “visiting a five star reviewed restaurant only to find burnt lasagne!”

Subscriptions

The new law will require businesses to ensure that customers can exit a contract in a straightforward, cost-effective and timely way. Businesses will need to provide clearer and enhanced information to consumers before they enter a subscription contract and will be obliged to remind consumers before a free trial or low-cost introductory offer comes to an end, and before a contract auto-renews onto a new term.

Enforcement

The Competition and Market Authority (“CMA”) will be able to directly enforce consumer law with new powers to fine businesses up to 10% of global turnover for consumer law breaches. The CMA will also be able to impose additional hefty daily penalties for continued non-compliance and penalties on businesses of up to:

• 5% of a business’ annual global turnover for breaching undertakings given to the CMA; and
• 1% of a business’ annual global turnover for non-compliance with an information notice, concealing evidence or providing false information.

As an alternative, the CMA will be able to fine individuals instead of businesses (for example, by imposing a fine of up to £300,000 for a breach of consumer law).

Actions to take

The reforms are not yet effective, but as the issue of fake reviews becomes an increasing focus for regulators. Consumer facing businesses should:

• Review and update the information available to consumers to ensure it is transparent about how product reviews are obtained.
• Review processes and technical measures to verify customer reviews to ensuring that they are genuine and originate from consumers who actually purchased the product or service; and
• Reviewing its existing subscriptions and any plans for further subscription based products or services to ensure compliance with current CMA guidance and the CAP Code and to be vigilant for any changes in the rules.

Comment

It is already a breach of advertising rules and consumer law to commission fake reviews so it is unclear what additional benefit these new rules will have, and businesses will clearly be concerned about further regulatory pressure, especially given the size of the potential fines and penalties outlined in the proposals.

It isn’t clear when the new rules will come into play and much of the detail is still uncertain, but if your business allows online reviews or offers subscription based pricing models and you are concerned about staying compliant then it’s safe to say that you should start planning now.