CMA publishes draft guidance on enforcement of DMCCA consumer law

The question

How will the CMA look to enforce the consumer protection law sections of the recently enacted Digital Markets, Competition and Consumers Act 2024 (DMCCA)?

The key takeaway

The CMA has published draft enforcement guidance for its new consumer protection powers under the DMCCA. This guidance outlines the enforcement process, from pre-launch to final decisions, offering essential insight into the procedures and penalties. A consultation on the content of the guidance recently closed and we expect the final version of the guidance to be published ahead of the relevant parts of the DMCCA coming into force next year (currently expected to be around April 2025).

The background

The recent passing of the DMCCA onto the statute books will introduce sweeping changes to the consumer protection landscape, as well as updating the digital markets and competition law regime in the UK. Crucially, the CMA will soon be able to make determinations in relation to whether a breach of consumer protection law has occurred, as well as being able to direct enforcement action against breaching businesses. The reforms also bring in a raft of new protections for consumers, including a ban on a number of activities relating to fake reviews, reforms in how prices must be shown to shoppers (to prohibit so called "drip pricing") and further regulations for subscription contracts.

The development

The CMA has published draft enforcement guidance, which offers key insights into how the regime under the DMCCA will work in action. The guidance outlines the stages in the investigations process, namely:

• Pre-launch: the phase before the CMA decides whether to open a case, during which time the CMA may make enquiries and research. This will help it form a view on the merits of pursuing a case under its direct consumer enforcement powers. Once a decision has been made to open an investigation the CMA will usually publish a notice about the case.
• Provisional Infringement Notices: under the DMCCA, a Provisional Infringement Notice (PIN) can be served on any party who may be involved in a relevant infringement. Parties who receive a PIN will be allowed to inspect the CMA's file (excluding certain documents) to allow them to defend themselves and make representations in their defence.
• Information-gathering powers: the CMA may use its powers to gather information both before and after a decision to open an investigation. It will use written information notices to require persons/parties to provide information. The CMA can impose monetary penalties on those who do not comply with informational notices.
• Representations: parties may be invited to make written representations or representations at a single oral hearing, or both.
• Final decision: the CMA may give a Final Infringement Notice (FIN) to any party it is satisfied has engaged, is engaging or is likely to engage in a relevant infringement, or is an accessory to that relevant infringement. A FIN will set out the grounds for giving the notice, any further justifications for it and the remedies/penalties that the party will be subject to.

The potential consequences of any findings and failures (besides FINs) are also covered. These include:

• Undertakings: the CMA has broad discretion to accept an undertaking from a party that it will make a change in practices, prior to making a FIN. If accepted, the undertaking will be published on the CMA's website. After acceptance, there are limited circumstances in which the CMA can then issue a FIN.
• Settlements: a party may enter into a settlement with the CMA. Settlements normally involve an admission of conduct from the party, an agreement to amend their behaviour and to comply with any FIN. Parties can also expect a streamlined investigation process and will agree not to appeal any FIN (settlement discussions will be subject to a set timetable and procedure). The decision to settle is at the CMA's discretion. Parties may withdraw from settlement discussions before confirmation in writing. However, if they choose to withdraw after written confirmation, the CMA may still take into account any admissions of conduct in its investigations.
• Enhanced consumer measures (ECMs): ECMs were first introduced to the consumer protection law enforcement framework in 2015 and will be a feature of the new regime too. The guidance outlines proposals for the use of three measures: redress, compliance and choice. Redress measures require the party to offer an impacted consumer some form of compensation or other redress in relation to the breach. The CMA can also direct a party to implement compliance measures to increase adherence with the law. "Choice measures" are intended to give the public more information about the party's infringement, allowing them to make more informed purchasing decisions.
• Online interface notices (OIN): OINs can be issued to an infringing party or a third party in connection with websites, applications or other digital content that they operate. They can require a person to remove content, disable or restrict access, display a warning or delete a domain name entirely.
• Penalties: the CMA has stated its objectives in imposing penalties are to defer infringements of consumer law, to reflect the seriousness of any infringements, and to encourage cooperation during investigations. The guidance sets out a framework for determining the overall level of harm and culpability, which offers starting points for calculating the monetary penalty as a fixed sum or percentage of UK turnover (whichever is highest). The guidance outlines how adjustments can be made for deterrence and aggravating/mitigating factors and how the final figure the CMA is proposing to fine a business will be checked to ensure it is within the statutory maximum.

The draft guidance also provides further details on the governance behind the CMA's decisions and the procedural complaints process.

Why is this important?

Legislation is only as effective as its enforcement. The DMCCA has ushered in a new era of direct enforcement for the CMA, with questions naturally arising around how it will work in practice. Given that, at the top level, the CMA will be able to impose fines of up to 10% of a business's global annual turnover, the new guidance offers much-needed clarity on what to expect if a party falls under investigation, following the process from cradle to grave and offering a new understanding of what's at stake and how it will work.

Any practical tips?

As well as taking measures to ensure compliance with the DMCCA, consumer-facing companies may also want to acquaint themselves with the enforcement guidance. The CMA's investigative and enforcement powers are extensive, and companies caught up in potential investigations should prepare for a range of eventualities, from providing information and making representations, to giving undertakings, agreeing settlements, and paying (potentially sizeable) penalties.

Autumn 2024