Digital Markets, Competition and Consumers Bill

Written evidence submitted by Shoosmiths LLP (DMCCB44)

Digital Markets, Competition and Consumers Bill (the "Bill"): Shoosmiths Response to Call for Written Evidence

Executive Summary

· A definition of ‘collective harm’ should be clearly stated;

· The requirement that commercial practices be ‘directed to consumers in the United Kingdom’ to fall within scope should be clearly defined;

· A definition of an ‘accessory’ to an infringement should be clearly stated;

· The relevant time period for calculating turnover for the purpose of monetary penalties should be stated;

· The circumstances in which online marketplace providers could be become subject to an online interface order or an online interface notice should be identified clearly;

· The House of Commons Public Bill Committee (the "Committee") should assess how long it is likely to take the CMA to complete all steps required under the Bill and whether the overall timeframe for enforcing monetary penalties will, in fact, shorten the existing enforcement process;

· The introduction of several omitted Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013 requirements for subscription contracts;

· Clarification as to when subsequent reminder notices for subscription contracts should be provided.

Introduction

Shoosmiths LLP is a law firm operating from 13 locations across the UK, offering clients legal excellence in all core legal disciplines, together with key specialisms and deep sector expertise. The firm comprises 230 partners and 1500+ lawyers and business support employees and has a turnover of £181.8 million as at end of April 2022.

Within our Business Advisory Division, we have a dedicated consumer team who provide expert consumer legal support to a wide range of FTSE 250 clients. Our consumer team is distinguished by being one of the few specialist consumer teams operating on a national basis, with recognised experts frequently advising iconic brands and global businesses on a range of strategic consumer compliance matters.

The Bill will transform the landscape in which our clients operate and the regulatory environment which we advise on. On the basis of our experience in this sector we set out our considered response to the draft DMCC Bill below (the "Response").

Response to Call for Written Evidence

1. Concept of ‘collective harm’

1.1 Comment: The Bill’s requirement that a commercial practice must harm the collective interests of consumers is too vague to give traders any real steer on what activities it must avoid.  In particular, clarification is sought on the following issues:

1.1.1 What is meant by ‘harm’? 

1.1.2 How serious must the harm be before a commercial practice could be deemed to be a relevant infringement? 

1.1.3 What type of harm would be caught by this requirement, i.e. actual financial loss, or any type of harm? 

1.1.4 What is meant by ‘collective interests’? 

1.1.5 How many consumers’ interests would need to be harmed in order to satisfy this requirement? 

1.2 This requirement for collective harm should be more clearly stated for the benefit of traders and consumers. 

1.3 Recommendation: Amend the Bill, or, at the very least, publish guidance in order to clarify the meaning of ‘harm’ and ‘collective interests’.

2 Concept of ‘UK connection’

2.1 Comment: The Bill’s condition that a commercial practice ‘directed to consumers in the United Kingdom’ would be caught by the Bill is unclear. In particular, clarification is sought on the following issues:

2.1.1 How would a commercial practice be so ‘directed’? Would this capture any practice in the English language? 

2.1.2 Are practices carried out via a website which allows consumers based in the UK to place an order for goods/services covered, even if that website is not specifically targeted at UK consumers? Alternatively, will practices only be covered where they are carried out via websites specifically targeting UK consumers? 

2.2 The condition that commercial practices be ‘directed to consumers in the United Kingdom’ to fall within scope would benefit from greater clarify so traders know when to amend their practices and consumers know when they will receive protection. 

2.3 Recommendation: Amend the Bill, or, at the very least, publish guidance in order to clarify the meaning of ‘directed to consumers in the United Kingdom’.

3 Concept of "accessories" to commercial practices

3.1 Comment: It is currently unclear when a company may be an ‘accessory’ to a relevant infringement and, therefore, exposed to an enforcer applying for an enforcement order.  Clarification is sought on the following aspects:

3.1.1 Is it the intention that online marketplace providers who allow other traders to use their platforms to sell goods/services to consumers could be an ‘accessory’? 

3.1.2 If so, in what circumstances would such a marketplace be considered to be an ‘accessory’ – would they need to be actively involved in facilitating the relevant infringement, or could they be an ‘accessory’ simply where they have failed to take action against the trader? 

3.1.3 What defence would be available to the relevant marketplace provider? 

3.2 Recommendation: Amend the Bill, or, at the very least, publish guidance in order to clarify the meaning of ‘accessory’.

4 Monetary penalties and turnover

4.1 Comment: The Bill provides for the higher amount of each monetary penalty to be calculated as a percentage of turnover.  However, the Bill fails to identify the turnover period relevant to the calculation, e.g. the respondent’s turnover during the 12 months preceding the date of the relevant infringement. 

4.2 While we note that the Secretary of State has the power under section 196(3) to make provisions for determining the turnover, the turnover period should be specified now to avoid any confusion and to give traders certainty as to their potential exposure.  This is the approach taken in other legislation where monetary penalties can be applied, including in relation to data protection breaches.

 

4.3 Recommendation: Amend the Bill to determine the turnover period.

5 Online interface orders/notices

5.1 Comment: We assume from sections 153(5) and 176(10) of the Bill that the CMA would be able to apply for an online interface order or give an online interface notice where an online marketplace provider allows or fails to prevent a trader using its marketplace in connection with a relevant infringement.  However, this is not clear on the face of the Bill.  If the Bill intends to capture a particular commercial practice within its scope, this intention should be made expressly in the wording of the Bill in order to give online marketplace providers with a clear indication of the steps that their businesses need to take to achieve compliance. 

5.2 Recommendation:  Amend the Bill, or, at the very least, publish guidance in order to clarify the circumstances where online marketplace providers could be become subject to an online interface order or an online interface notice.

6 Timeframe for imposing penalties:

 

6.1 Comment: We are uncertain whether the Bill will achieve its stated aim of expediting enforcement of consumer law breaches.  Non-compliant traders are unlikely to have to pay a monetary penalty for many months.  Before the CMA can impose a penalty it must first jump through a number of hoops.  Firstly, the CMA must have reasonable grounds for suspecting that a business has been, is, or is likely to be non-compliant with consumer protection laws.  The CMA is then likely to conduct an investigation into the suspected non-compliance.  Only once this investigation has started and the CMA has established reasonable grounds to believe that the business has been, is, or is likely to be non-compliant with consumer protection laws can the CMA give the business a provisional infringement notice.  On issuing of the provisional infringement notice, the business has the chance to make representations to the CMA.  Only once time has run-out for the business to make representations can the CMA give the business a final infringement notice.  Even then, the non-compliant business has a 60-day right to appeal against the notice to the High Court.  In this context, how likely is it that the timeframe for enforcement will be significantly shorter than the current 20-month average time taken from application to a judgment being given. 

6.2 Recommendation:  Assess how long it is likely to take the CMA to complete all of the steps summarised above and whether the overall timeframe for enforcing monetary penalties will, in fact, shorten the existing enforcement process.

7 Subscription contracts and the application of Part 2 and 3 of the Consumer Contracts (Information Cancellation and Additional Charges) Regulations 2013 ("CCRs"):

7.1 Comment: The Bill disapplies Parts 2 and 3 of the CCRs from subscription contracts. We understand that this is on the basis that the Bill introduces separate information requirements and cancellation rights for subscription contracts. However, the Bill does not replicate all CCR requirements that remain applicable to subscription contracts. For example, the Bill appears to be silent regarding a trader’s obligation to:

7.1.1 ensure the order placement button (when selling online) indicates an obligation to pay (14(4) CCRs); and

7.1.2 obtain the express consent and acknowledgement from consumers to supply subscription services/digital content during the 14-day cancellation period (36 and 37 CCRs).

7.2 Recommendation: Amend the Bill to include the omitted requirements described above.

8 Subscription contracts and subsequent reminder notices

8.1 Comment: It is currently unclear as to when subsequent reminder notices should be provided to consumers under s252(2) of the Bill. For example, is it the intention of the Bill that for monthly subscription contracts reminder notices should be sent for the first renewal payment and then at 6 monthly intervals?

8.2 Recommendation: Amend the Bill, or, at the very least, publish guidance in order to clarify when subsequent reminder notices should be provided.

Yours sincerely

SHOOSMITHS LLP

June 2023

 

Prepared 29th June 2023