Digital Markets, Competition and Consumers Bill

Written evidence submitted by the UK Interactive Entertainment Association (Ukie) (DMCCB21)

Ukie submission public bill committee – Digital Markets, Competition and Consumers Bill

Please contact Dominic Murphy, Head of Policy and Public Affairs, Ukie, dominic@ukie.org.uk

Introduction

1. I am writing to you on behalf of the UK Interactive Entertainment Association (Ukie) to raise a number of points with regards to the recently published Digital Markets, Competition and Consumers Bill (DMCC).

2. Ukie is the trade body for the UK’s video games and interactive entertainment industry. A not-for-profit, it represents more than 600 games businesses of all sizes from start-ups to multinational developers, publishers, and service companies, working across online, mobile, console, PC, esports, virtual reality and augmented reality.

3. Ukie’s aim is to make the UK the best place in the world to make, sell and play games and we aim to support, grow, and promote member businesses and the wider UK video games and interactive entertainment industry by optimising the economic, cultural, political, and social environment needed for businesses in our sector to thrive. We believe this is best achieved by a market-driven, open and competitive business environment which supports innovative businesses to grow and create compelling content across a variety of platforms.

Executive Summary

4. The UK video games industry is thriving and has experienced significant growth over the past few years. The most recent Ukie consumer valuation of the UK games market saw that it had grown to over £7 billion in 2022 – an increase of 17% since pre-pandemic levels. The model of how players consume content has also changed significantly over the past few years, with subscriptions packages on major platforms becoming increasingly popular. It is estimated that 58% of players in the UK aged 13-64 have a subscription on a major platform. [1]

5. We welcome the broad aims and ambitions of the recently published DMCC Bill which aims to boost competition across the economy and better protect consumers. However, there are a number of provisions in Section 4 of the Bill with regards to subscriptions which we believe as currently drafted are disproportionate, overly prescriptive and stand to have significant adverse consequences for UK businesses, and consumers, as a result.

6. We call on MPs to reconsider and clarify a number of provisions in the Bill with regards to subscriptions and provide greater certainty and clarity for businesses in navigating this complex Bill:

· ‘Cancel by any means’ - The provisions as currently drafted are practically unworkable, broad and outdated with regards to digital subscriptions. Games subscriptions often have the ability for real-time, self-service cancellation. The method of the cancellation should match the method of sign up, and in cases where the sign up was made offline, there should be a ‘reasonable period’ for customers to cancel with specified routes for consumers to cancel clearly identified by company websites.

· Renewal notices - The provisions on reminder notices for the end of contracts and renewals are overly prescriptive and risk information overload with multiple notifications sent in quick succession. We recommend that a single renewal notice is sent for online subscriptions in a timely and straightforward manner. We also urge the Government to clarify whether renewal notices are required for short term trial or monthly contracts and would welcome the Committee pushing for clarity on this matter.

· Annual subscriptions - Annual subscriptions paid upfront often benefit customers as they can be significantly discounted because of the certainty of revenue. The Bill’s provisions are unclear as to whether new clauses on pro-rated refunds apply to said subscriptions and we urge the Government to clarify what, if any refund, would be applicable in these circumstances. We would welcome the Committee pushing for clarity on this matter.

· Cooling off periods - Additional notifications of cooling off periods around renewal notices risk information overload. Furthermore, we believe it would be disproportionate for both businesses and consumers to consider a new contract, on the same terms as requiring an additional cooling off period . We would welcome the Committee pushing for clarity on this matter.

· Pre contract information - An overly prescriptive ‘one size fits all’ requirement on ‘key’ and ‘full’ pre contract information runs the risk of unintended consequences with consumers potentially skipping over important and meaningful information.

· Implementation period - The provisions in the Bill are complex and will take time for companies to understand and implement – with new systems and training likely to be required. There is currently no implementation period in the Bill, unlike previous changes such as GDPR. We urge the Government to consider a suitable implementation period for this Bill. We would welcome the Committee pushing for this from the Government to allow businesses a reasonable period to implement changes and educate consumers.

· Secretary of State powers - The Bill also confers broad delegated powers on the Secretary of State which will allow them to change provisions and the detail of information notices with minimal scrutiny. This will only create greater uncertainty for business and we do not believe these powers are warranted.

Cancel ‘by any means’

7. Clause 252 of the Bill introduces a ‘cancel by any means’ provision which, prima facie, allows consumers to cancel a subscription by writing, or by other means potentially including social media posts, to a company’s head office and to expect a cancellation within 3 working days. This provision is an unworkable ‘one size fits all’ approach and is outdated for digital subscriptions. We believe the method for cancellation should match the method for signing up, so, for instance, subscriptions entered into online would need to be cancelled online. Consumers for these subscriptions typically already have the ability for real-time, self-service cancellation on their own online accounts and, we believe, reflects how most consumers want to manage their online subscriptions.

8. Furthermore, cancellation by ‘any means’ lacks certainty – for example in cancellation by post. It is unclear in the current wording of the Bill as to whether the 3 working days start from when a cancellation may be sent, or when it is received by the company in question. Furthermore, processing such cancellations would require additional steps, systems and training to a) identify and route cancellation requests to the correct teams; and b) verify the account holder to ensure requests are legitimate before cancelling. Not only is the stated limit of 3 days far too short, enacting cancellations via this route this would require an extra administrative burden for both companies and consumers. Online self-service cancellation removes unnecessary steps and mitigates the potential for error and delays.

9. We recommend that for where subscriptions are for the supply of digital content, where all interaction takes place between the customer and supplier online via digital means, should be allowed to limit cancellation methods limited to that sphere.

10. Where the interaction is not wholly online, we recommend that any cancellation request via non online means be subject to a ‘reasonable period’ or to allow traders to specify suitable routes for cancelling a contract quickly and efficiently outside of an online route – which are clearly displayed for customers via the company website.

Renewal notices

11. The Bill is again very prescriptive for what information must be included in a reminder notification and when it should be issued i.e., within 3-5 working days before a cancellation date, with an additional reminder notice 10-14 working days before the cancellation date of contracts that renew 12 months or more. It is not clear whether receiving two similar notices days apart would be meaningful for consumers – given that the majority of digital games subscriptions can be cancelled online at any time. To avoid information fatigue, and consequent potential consumer harm, it would be more appropriate for companies to send one single reminder for annual subscription renewals, in a timely and straightforward manner, for instance 30 days before renewal.

12. It is also not clear whether these timings apply to short-term trials and subscriptions. Given that consumers already have a cooling off period, and access to online cancellation, we recommend that reminder notifications should not be required for short term free trials (e.g. 7 day trials) or monthly subscriptions. We would like to see greater clarity and flexibility in the Bill on which notices are required for which type of subscription and contract.

Annualised subscriptions

13. The Bill states that where a consumer cancels a subscription contract, traders must give the consumer a notice acknowledging that cancellation and refund any overpayments (clause 253). Overpayments are defined (subsection 6) as being any payment already made by the consumer for which they are no longer liable as a result of the contract termination.

14. However, it is not clear what an overpayment would be and whether consumers would be entitled to pro-rated refunds. This is particularly pertinent for longer subscriptions – where prices are often heavily discounted compared to a monthly equivalent. If a consumer, for example, pays 12 months up front, uses the content, but cancels an annual subscription after 6 months of use – it is not clear what, if any refund the consumer is entitled to. The Bill needs to have greater clarity on the specific circumstances which qualify as an overpayment, including the differences between a cancellation right under the bill and a normal end of contract procedure.

15. Businesses benefit from the revenue commitments of longer subscriptions, while consumers benefit from lower prices. If up front commitments were eligible for refunds, businesses would not be able to offer discounts in the same way, and consumers would suffer.

Cooling off periods

16. The Bill contains a number of provisions with regards to ‘cooling off periods’ which are overly prescriptive and risk confusion and would be an additional burden on traders. Under clause 258, traders are obliged to send a prescriptive cooling off notice on the first day of the renewal cooling off period in addition to messages about auto renewals. We believe that an auto-renewing subscription is the continuation of the initial contract, which has no fixed end date and that it is not a new contract if the terms remain the same. We therefore urge the Bill Committee to clarify that an auto-renewed contract on the same terms does not require an additional cooling off notice.

17. In addition to this, under the Consumer Rights Directive, the 14 day cooling off period ‘right of withdrawal’ is waived if the consumer acknowledges the right of withdrawal and that it is forfeited if they download content before the end of the 14 day period. We are requesting clarification that the cooling off period under this Bill has the same provisions so that consumers cannot take advantage by, for example, signing up and using digital content for 13 days before cancelling on the fourteenth day and being entitled to a full refund. We also believe cooling off periods for short term subscriptions, for example a monthly subscription or less – would be excessive and urge the Bill Committee to clarify the rationale behind any such measures.

Pre-contract information

18. The new bill requires companies to provide both ‘key’ pre-contract information as well as separately providing ‘full’ pre-contract information. In practice, however, there is a large degree of overlap between the two information requirements given full information necessarily requires off the information provided in the key information points. We worry therefore that there is a real risk of information overload for consumers who may skip over any information requirements that are lengthy, prescriptive, and repetitive. The requirement for two such information requirements – in addition to prescriptive requirements laid out in the bill may have the unintended consequences of consumers being presented information in a non-user-friendly and is again a ‘one size fits all’ approach counter to the original intentions of this Bill and the 2022 consultation on ‘reforming competition and consumer policy’.

Fines

19. The proposed fines go beyond similar legislation covering similar policy areas in different jurisdictions ( e.g. Omnibus Directive at 4%). A clear understanding on the conte x t in which 10% of global turnover is based would be beneficial for companies. As well, The CMA’s proposed policy statement on its fining powers (referenced in section 191) should clearly set out the fining powers in   more detail e.g. by potentially splitting the severity of breaches into grades with escalating fining brackets and providing the CMA’s rationale for why the stated fining brackets are proportionate to each breach.

Implementation and transition periods

20. The DMCC Bill, although laudable in its aims, is complex and often unnecessarily burdensome in its provisions and its implementation for consumers. The Government’s own impact assessment has stated that the costs to business of implementing these changes would be in the region of£1.2 billion, with set up costs of over £300 million. The UK games industry is predominantly comprised of SMEs and, whilst subscriptions are currently implemented via some of the largest platforms and publishers, subscription models are increasingly popular and seen as good value for players - increasing the cost and complexity of subscriptions through these changes is likely to be passed on to consumers.

21. It is also concerning that for a Bill of this size and complexity, there is currently no transition period to implement these changes afforded in the bill. Similarly complex bills, such as the implementation of GDPR via the Data Protection Act, saw businesses given a period of two years to prepare and make the necessary changes in order to be compliant. We urge the Government to insert a suitable implementation period into the bill in order to reduce uncertainty for businesses.

Secretary of State powers

22. Furthermore, there are a number of provisions within the Bill which give broad delegated powers to the Secretary of State (e.g. Clause 269) and grant them extensive powers to introduce new consumer rights, specify what information must be contained in information notices, and also specify periods of time within which a trade is required to refund any overpayment to a consumer following a cancellation. All of these changes can be made via secondary legislation with minimal scrutiny, heaping uncertainty on our members and other businesses who desperately need certainty and clarity on these new obligations.

23. As detailed in our submission our businesses operate exclusively in the digital space and provide easy, online, self-service cancellation methods. We believe the Government is taking a ‘one size fits all approach’ in this regard and we do not consider that the justification that power enables Government to respond to ‘emerging technologies and digital means of communication’ is appropriate.

We would welcome the opportunity to brief you on our concerns in further detail. Please get in touch at dominic@ukie.org.uk

June 2023