B2C businesses: 5 key lessons from the CMA's recent consumer enforcement activity

Whilst much attention has focussed on the CMA's new powers to impose substantial fines for breaches of consumer law, all three infringement decisions taken so far have also involved requirements to repay significant sums to consumers by way of redress measures – totalling almost £2 million (as compared with total fines of close to £8 million). For more detail on the CMA's first infringement decision, involving the highest fine to date, see our briefing: Consumer law: £4.2m fine on AA shows CMA means business.

In regulated sectors, such as energy or financial services, the amounts paid out under redress schemes for consumer protection-related breaches have significantly outstripped the sums paid in fines. For example:

• Energy:  over the past six years, Ofgem has imposed fines of £30 million for breaches of sectoral regulation designed to protect consumers – this is dwarfed by the £460 million in compensation required to be paid to consumers.
  
  
• Financial services: similarly, even though the FCA has imposed fines for mis-selling running into the hundreds of millions, the amount paid out to consumers under the FCA-mandated redress scheme for payment protection insurance alone exceeds £38 billion.

The CMA may not follow precisely the same trajectory, but the broader message is clear: fines are only part of the financial implications, and the same enforcement logic could produce materially more significant outcomes in future CMA consumer cases.

While the CMA is using AI to detect potential infringements across a wide range of businesses, finite resources mean that it cannot formally investigate every instance of potential consumer law infringement that it might become aware of. However, advisory letters have enabled the CMA to widen the impact of its enforcement efforts.

We expect the CMA to continue to use advisory letters to "magnify" the impact of its enforcement activity and encourage businesses to comply with consumer laws, particularly where a type of potentially infringing practice is reasonably widespread. The CMA's recent enforcement action in relation to parking charges has involved further advisory letters issued alongside the opening of a formal investigation (see Section 3 below) – and the CMA's most recent drip pricing investigations involved firms which had already received advisory letters.

The CMA has the power to require businesses to provide information and documents in connection with its investigations. Failing to comply or providing information that is inaccurate, incomplete, or misleading can result in sanctions, even where there has been no finding of a substantive breach of consumer law.

Experience in the competition law sphere demonstrates that the CMA regards and treats a failure to provide accurate, complete, and timely information as a serious matter. We expect the CMA to adopt the same approach in the context of consumer law enforcement, particularly as it continues to build out its use of the new consumer powers.

The CMA's first wave of direct consumer enforcement has focused heavily on pricing. This is likely to continue as the DMCCA has made certain infringements, such as drip pricing, easier to pursue. It also aligns with Government priorities, as indicated by a recent statement emphasising "everyday fixes" to help with the cost of living., which (among other things) set out plans to consult on making it easier for the CMA to take enforcement action against misleading discount claims. But it would be a mistake to assume that the CMA is focussed on pricing to the exclusion of other practices that may be regarded as harmful to consumers.

The CMA also keeps a watchful eye on developments outside of the UK – which may sometimes influence its enforcement activities. For example, the recent investigation into Microsoft 365 subscriptions follows action taken by regulators in Australia and Italy over similar concerns.

Later this year, the European Commission is expected to publish its long-awaited draft Digital Fairness Act, which is likely to contain measures intended to tackle so-called "dark patterns," i.e. techniques used to influence consumers to take decisions which may not always be in their best interests. There is no equivalent UK legislation in the pipeline, but prior to gaining new powers under the DMCCA, the CMA had already conducted research into this area and taken enforcement action against a number of online sellers for breach of existing UK consumer law. The CMA may well be on the lookout for more targets in this space – although "dark patterns" are an example of where consumer law can raise nuanced questions as to where the line is drawn between legitimate persuasion/promotion and undue pressure or misleading conduct, which may make them more challenging as an enforcement target.  In particular, unlike drip pricing, the CMA will normally need to prove that the practice in question had a distorting effect on the consumer's behaviour.

Each of the CMA's consumer law infringement decisions to date has involved early settlement.  This involves the business being investigated accepting that it has breached consumer law and cooperating fully with the CMA, in return for which it can expect to receive a discount of up to 40% in relation to the fine imposed.  That discount is usually also conditional on the business not appealing the CMA's decision.

So far, all businesses which have engaged in early settlement have received the full 40% discount – which is encouraging in the sense that it suggests that the CMA is not setting an unrealistically high bar in terms of the level of cooperation expected. A key reason that the CMA encourages early settlement is that it allows the CMA's limited resources to be redeployed to investigating other potential infringements.  For example, within two months of announcing the early settlement of its first three drip pricing cases, the CMA has launched three new inquiries into the same practice.

The practical message is simple. Businesses should not wait for sector-specific enforcement before acting; the regime is live and the CMA has shown it is willing to use its new powers to actively enforce it. The combined risk of fines, redress, remediation costs and reputational impact also means that consumer law compliance should now be considered at a board-level.