Digital platforms could be hit with huge fines for failing to protect consumers from subscription traps and online scams, a new UK regulator has said.
The Digital Markets Unit (DMU) will be given new powers to ensure that online customers and businesses are not unfairly disadvantaged by the biggest players.
Firms deemed to have “strategic market status” in key digital services could be forced to abide by tailored rules on how they operate or face heavy fines under the draft Digital Markets, Competition and Consumers Bill.
The DMU—launched two years ago within the Competition and Markets Authority (CMA)—will now be able to carry out targeted interventions to allow start-ups or smaller firms to compete.
The bill will end a period of limbo for the DMU, which was set up without any powers beyond the CMA’s existing arsenal.
It will also enable the government to ban sites from facilitating fake reviews or advertising consumer reviews without taking reasonable steps to check they are genuine.
The new rules will ensure consumers can end subscriptions in a straightforward, cost-effective, and timely way and require businesses to send a reminder when a free trial or introductory offer is coming to an end.
Criticism of Powers
However critics of the new legislation say it could make the UK a “hostile place” to invest.
Matthew Lesh, director of public policy and communications at the Institute of Economic Affairs, said he did not believe there was a need for more digital market powers.
“Companies could be forced to ask permission before launching products or required by the regulator to modify features in ways that undermine user privacy,” he said in a statement on Tuesday.
“These interventions risk making the UK a hostile place to invest and innovate.”
Lesh said digital markets are “highly dynamic, competitive, and unpredictable.”
“This can be seen from the downfall of MySpace to the recent rise of ChatGPT challenging Google and TikTok challenging Facebook,” he said.
“The largest companies spend tens of billions on research and development and employ thousands of people in the UK.
“The Competition and Markets Authority already has extensive powers and the case for more is weak.”
Holding Big Tech to Account
Ahead of taking the bill before the Commons on Tuesday, business and trade minister Kevin Hollinrake said the legislation will make sure bigger platforms are held to account.
“Smartphones and online shopping have profoundly changed the landscape for businesses, consumers, and the foundations of a modern thriving economy, which now lie in strong consumer choice, confidence, and competition,” he said.
“From abuse of power by tech giants, to fake reviews, scams and rip-offs like being caught in a subscription trap—consumers deserve better.
“The new laws we’re delivering today will empower the CMA to directly enforce consumer law, strengthen competition in digital markets, and ensure that people across the country keep hold of their hard-earned cash.”
CMA Chief Executive Sarah Cardell said the bill will help the CMA take “swift, decisive action” to tackle rip-offs and better protect consumers.
“The new fining powers will provide an important deterrent to businesses seeking to take advantage of people while also ensuring fair dealing businesses can thrive,” she said.
“The bill will also strengthen the Digital Markets Unit, helping to ensure digital markets remain competitive and continue to benefit people, business, and the UK economy.
“We welcome its introduction to Parliament and look forward to it progressing.”
Which? Director of Policy and Advocacy Rocio Concha described the legislation as a “pivotal step” to make markets in the UK “work better for consumers, businesses, and support economic growth.”
She added: “Whether it’s fake reviews by dishonest businesses or people getting trapped in unwanted and costly subscriptions, our consumer protections are overdue an upgrade.
“Which? has long campaigned for stronger powers for the Competition and Markets Authority, including tough enforcement and the ability to fine firms that break the law directly.
Subscription Traps
Concha said the empowerment of the CMA’s Digital Markets Unit will also be a major step forward.
“It needs the right powers to loosen the vice-like grip of a handful of tech giants that will foster innovation and give consumers more choice and lower prices.”
The bill will be introduced to the House of Commons by Hollinrake on Tuesday and will have three key areas of focus: consumer protection, digital markets, and competition.
The new measures will come into effect as soon as possible following parliamentary approval, subject to secondary legislation and the publication of guidance.
Tuesday’s announcement follows the government’s responses to the “reforming competition and consumer policy” and “a new pro-competition regime for digital markets” consultations published last year.
Feedback was received from businesses, consumers groups, regulators, and others to ensure reforms provide for “the strong and proportionate competition and consumer law and enforcement that consumers and businesses need to thrive,” the Department for Trade and Investment said.
Firms may be given instruction by the DMU to open up their data to rival search engines, or to increase the transparency of how their app store or marketplace review systems work.
If firms don’t abide by the rules set for them, the DMU will have the power to fine them up to 10 percent of their global turnover and make senior managers personally responsible for ensuring their company complies with the DMU’s requests.
Fake reviews will be tackled by taking a new power in the bill and consulting on a new law against commissioning someone to write or submit a fake review.
Posting consumer reviews without taking reasonable steps to check they are genuine, and offering or advertising to submit, commission, or facilitate fake reviews, will also be subject to enforcement.
“Subscription traps”—where businesses make it difficult to exit a contract—will also be stopped.
PA Media contributed to this report.
