Consultation on Competition and Consumer Policy Reform - Which? response

Summary

Which? welcomes the Government’s consultation on the reform of competition and consumer policy and the opportunity to contribute evidence and recommendations.

Economic recovery following the pandemic depends on confident consumers engaging in well-functioning, innovative consumer markets. But the current competition and consumer framework has failed to keep pace with the types of harms that consumers now face, particularly with regard to fast-moving digital markets. This consultation provides a crucial opportunity to overhaul the system and ensure that whether shopping online or in more traditional consumer markets, consumers and responsible businesses are appropriately protected.

Competition and consumer policy should work together to ensure markets operate fairly and efficiently creating thriving consumer markets and delivering the best outcomes for consumers. Competition policy creates the right conditions for companies to compete to win consumers’ business. Consumer policy ensures consumers have the right protections to confidently engage with markets. These protections also ensure that responsible businesses that treat consumers fairly compete on a level playing field and are not undercut by unscrupulous competitors. By building consumer confidence and trust, consumers are more likely to engage with new products and services, driving innovation.

The UK has been a global leader on consumers’ rights and has a well developed competition and consumer protection framework. But Which? research, investigations and consumer insight have exposed a number of gaps in the system, which have been particularly highlighted by the Covid-19 pandemic. New markets, such as online platforms, have emerged and rapidly become a mainstream route for consumers to access a wide range of goods and services. Although these markets offer many benefits, they are not covered by the same consumer rights consumers should be able to expect and raise some fundamental challenges for the competition regime. 

The Covid-19 pandemic has also highlighted how even when consumer rights are in place, and consumers are relying on more traditional business models, enforcement mechanisms are not effective in delivering business compliance. Public enforcers lack adequate powers and resources to respond quickly and forcefully to secure compliance on issues such as refunds for cancelled travel and events. Private enforcement mechanisms, such as alternative dispute resolution (ADR) are also too limited in terms of their scope and authority to be a viable route for consumers to resolve complaints in many sectors. As we build back from the pandemic, consumer confidence will not only be critical to getting the economy back on track, but also building a resilient and competitive economy for the longer term.

We welcome the recognition of many of these challenges within the consultation. The proposals set out will lead to some fundamental and long over-due improvements. However, as the UK re-examines its regulatory regime outside of the EU, we think that a more ambitious approach is also needed in some key areas to ensure that it is fit for purpose and able to deal with the challenges that will be facing consumers and businesses in the coming months and years.

1. Effective enforcement powers. We strongly support the Government’s proposals to give the CMA new administrative powers that will be an effective deterrent against non compliance with consumer law and enable the CMA to intervene more effectively when there are breaches. In too many cases, both during the Covid-19 restrictions and before, the CMA’s current powers have been too weak to secure prompt responses from companies that are breaking consumer law. Stronger fining powers, similar to those used by other regulators in the UK and in other countries, alongside other important reforms, such as information gathering powers, will enable the CMA to respond quickly, reducing consumer harm and protecting responsible businesses who play by the rules. The Government should also grant the Civil Aviation Authority (CAA) administrative powers so that it is able to take effective action to protect the rights of consumers in this sector.
2. Strengthening private enforcement. There should be a quick and effective route for consumers to enforce their consumer rights directly, but the current system of ADR fails consumers in many sectors. We agree that ADR should be made mandatory in the motor vehicle and home improvements sectors, but think that this should also be the case for aviation and package holidays, given the significance of these sectors and scale of consumer detriment. We are concerned that having more than one provider in sectors where ADR is mandatory works against consumers’ interests and therefore authorities should seek to have a single provider. More generally, there should be better signposting to ADR schemes, they should be free to access, timescales for submitting a case and reaching a decision should be reduced and compliance with decisions improved. Effective competent authorities should be in place to oversee ADR schemes and consideration should be given to whether a single body should be given an oversight role across all schemes to ensure effective delivery and to promote best practice.
3. A flexible markets regime that tackles consumer harms. We welcome the proposals designed to allow the CMA to make better use of market inquiries to tackle harms across the economy. We agree that the CMA should be given powers to implement a flexible range of remedies at the end of market studies. However, for this to truly deliver for consumers, the CMA’s powers must allow them to implement remedies in markets where it finds consumer harms that may not be linked directly to adverse effects on competition. While updating the consumer enforcement rules is necessary, allowing the CMA to tackle a broader range of consumer harms through its market inquiry tools will address a continued deficiency in the consumer protection regime by allowing the CMA to act against new and emerging harms.
4. Enabling collective redress. We also strongly support the introduction of a collective redress regime for consumer protection cases, as already exists for competition cases. This should work on an opt out basis and cover all aspects of consumer law. Third party funding should be allowed to cover costs, and costs should be capped to ensure public interest organisations are able to bring cases to court.
5. Digital consumer rights. The consultation includes a number of welcome proposals for addressing exploitative online practices including fake reviews, subscription traps and drip pricing. However, as identified in the consultation, this is not an exhaustive list and new exploitative practices can emerge and rapidly become a source of serious detriment. The Government must ensure that regulators and consumers have the legal tools they need to respond to these developments by reviewing and updating the Consumer Protection from Unfair Trading Practices Regulations (CPRs) (especially the list of banned practices) and encouraging regulators to use the flexibility already available to them. In addition, the Government should consider whether the CMA requires additional tools that allow it to take action against new exploitative practices without having to wait for the development and adoption of new primary legislation.
6. Platform responsibility. Online platforms are now a significant way in which consumers access goods and services. While these platforms deliver many benefits for consumers, the lack of effective regulation in this area has led to a number of consumer harms in those platforms including the proliferation of fake reviews, scams and unsafe products. To address these issues the Government should review the legal responsibilities of platforms to ensure that they are aligned with their ability to support consumer protection and place a proactive duty on platforms to take action to ensure compliance with consumer law on their sites.
7. The role of Trading Standards services. Local authority Trading Standards services (LATSS) working with National Trading Standards (NTS) and Trading Standards Scotland (TSS) are a critical part of the consumer enforcement landscape and are responsible for the majority of consumer protection enforcement in the UK. However the current system lacks the structure and resources to address the challenges facing consumers in a modern economy. To address these issues the Government should conduct a review of Trading Standards and how consumer enforcement can most effectively be delivered at the local, regional and national level. Although the Government may be able to make some changes in the short term, the review should be carried out separately from legislation adopted as a result of this consultation so as not to delay progress on the important reforms that the Government has already proposed.