Reform of Consumer Protection Measures – What’s Happened and What’s Next

Ellie GannonPosted by

Andrew Tyrie, Chair of the Competition and Markets Authority (CMA), wrote to the Rt Hon Greg Clark MP, Secretary of State for BEIS, on 21 February 2019, outlining proposals for reform of the competition and consumer protection regimes of the CMA. The need for change comes from what is perceived as a growing gap between public expectations of markets and what competition authorities deliver, particularly in response to fast moving digital markets. There has been an increase in enforcement actions against online markets including against fake reviews, online gaming and online hotel booking. This article reflects on two prominent enforcement actions by the CMA, which demonstrate that it is using what forces it does have, and goes on to discuss the nature of the reform that Lord Tyrie is pushing for.

Online secondary ticketing market

The CMA conducted a compliance review into the secondary ticketing sector in 2016, and went on to launch an enforcement investigation in relation to suspected breaches of consumer protection law in the online secondary ticketing market. The CMA were particularly concerned about whether customers were getting the full range of information required by consumer protection law when buying tickets put up for resale. Following the investigation, the CMA took enforcement action against three secondary ticketing platforms. The offending companies all entered into an enforcement undertaking to make changes to the way they gather and display information in relation to tickets resold on their websites by midnight on the 17 January 2019. Another company, Viagogo, did not agree to undertake to make the changes that the CMA required of them. In response, the CMA used its statutory ability to issue civil court proceedings, to stop the consumer law breach. The CMA was successful in court and managed to secure an order requiring Viagogo to comply with consumer protection law by 17 January 2019, including in relation to the provision of ticket information to purchasers under the CRA.

Following the deadline, the CMA issued a statement to the effect that it had serious concerns that Viagogo had not complied with the terms of the court order in full and confirmed its intention to pursue further legal action if necessary. The CMA moved forwards with legal proceedings to find Viagogo in contempt of court. On 5 September 2019, the situation was diffused as the CMA stated that: “following continued pressure from the CMA, viagogo has now addressed outstanding concerns about how it presents information to its customers. The CMA has therefore suspended preparations for further court action.”

Care homes – post death fees

The CMA opened an investigation into a number of care home providers in 2017, due to concerns that some of the contract terms and/or practices they use may breach consumer law. In particular, the CMA were concerned about fees that were charged by care homes to consumers post death. Following the investigation the CMA secured an undertaking from a leading UK care home provider, in which it agreed to drop its ‘after death’ fees for residents. Following this, the CMA went further with another carehome by securing more than £2million in compensation for residents in relation to compulsory ‘upfront fees’ and an undertaking from the company group that in future such fees will never be charged to new residents.

Unsatisfied with the reform of other care home providers, the CMA then went on to issue court proceedings against Care UK, on the grounds that although Care UK stopped charging compulsory upfront ‘administration’ fees following CMA intervention, it had not agreed to make any refunds. The CMA is currently seeking a court order to secure refunds for over 1,600 residents, and to stop Care UK from charging similar fees again in the future. At the time of writing, however, Care UK had successfully fended off an appeal from the CMA over the procedure to be used in the court action. The High Court upheld a judge’s decision to allow a legal dispute to be heard as a Part 8 claim under civil procedural rules. This permits Care UK to challenge the substantive issues of the watchdog’s findings in the forthcoming trial. In July this year, after a period of consultation a letter before action for court proceedings was issued to Barchester Healthcare Limited and four other Barchester group companies, in relation to the administration fee and fees charged following a resident’s death. The letter before action notifies Barchester that, if necessary, the CMA is intending to issue a claim against Barchester for breach of consumer protection law in the courts. At the time of writing both the above cases are still open.

Unsatisfied with the reform of other care home providers, the CMA then went on to issue court proceedings against Care UK, on the grounds that although Care UK stopped charging a compulsory upfront ‘administration’ fees following CMA intervention, it had not agreed to make any refunds. The CMA is currently seeking a court order to secure refunds for over 1,600 residents, and to stop Care UK from charging similar fees again in the future. At the time of writing, however, Care UK had successfully fended off an appeal from the CMA over the procedure to be used in the court action. The High Court upheld a judge’s decision to allow a legal dispute to be heard as a Part 8 claim under civil procedural rules. This permits Care UK to challenge the substantive issues of the watchdog’s findings in the forthcoming trial.

In July this year, after a period of consultation a letter before action for court proceedings was issued to Barchester Healthcare Limited and four other Barchester group companies, in relation to the administration fee and fees charged following a resident’s death. The letter before action notifies Barchester that, if necessary, the CMA is intending to issue a claim against Barchester for breach of consumer protection law in the courts. At the time of writing both the above cases are still open.

The future of CMA consumer protection measures

The CMA is clearly starting to take its role in tackling consumer rights issues seriously. In anticipation of the publication of the white paper on reforms to consumer protection measures, it is a fitting time to reflect on the above enforcement measures to understand whether the reforms proposed by Lord Tyrie would allow the CMA to have done more. In his letter Lord Tyrie particularly highlighted issues that the CMA encounter in enforcement; including the fact it must take businesses to court in order to get a binding remedy and even when in court the CMA will not have civil fines available to it. The government is already seeking to introduce legislation to give the courts the power to impose civil fines up to 10% of global turnover for breaches of consumer law, which it hopes will make businesses take the matter more seriously.

In addition, the CMA wants the authority to decide whether there has been a breach of consumer law; to declare the fact publicly; to force offending companies to stop that activity; and impose fines. The CMA envisages fines being applicable when businesses do not comply with the final remedies of a market investigations or if an undertaking is breached. In the same way as competition law cases are dealt with, CMA consumer law decisions would be appealable to the Competition Appeal Tribunal.

If matters go to court, the CMA wants to simplify and expedite scrutiny of the CMA’s decisions. Two methods are proposed to achieve this, firstly by leaving behind the current “full merits” standard, and moving to a judicial review standard (which is currently used for CMA mergers decisions, and on remedies following market investigations), or to a new standard of review, setting out specified grounds of permissible appeal; and  secondly by amending the Competition Appeal Tribunal’s rules of procedure, to facilitate a faster review process.

The potential for stronger CMA powers, against the backdrop of a period of increased consumer rights enforcement actions suggests that consumer protection is an area that businesses may be forced to pay more attention to. Recent reports indicate that it is probable that the government is likely to give the go ahead to for the CMA to, amongst other things, deal with consumer law breaches directly. It is suggested that BEIS, will green light a package of new powers early next year. It will be interesting to see how far the CMA tries to push its new powers, as  significant change would require considerable analysis to understand if it was reasonable. We continue to follow and comment on the reform developments as they come to light.

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