The UK Digital Markets, Competition and Consumers Act (DMCC Act) received Royal Assent on 24 May 2024, significantly expanding the Competition and Markets Authority’s (CMA) power to enforce consumer laws. As required under the DMCC Act, the CMA released draft rules and guidance on the direct consumer enforcement regime on 31 July 2024, outlining how it will exercise its new direct enforcement powers.
As we noted earlier this summer, the DMCC Act introduces a direct enforcement regime where the CMA will have the regulatory power to enforce consumer laws by imposing monetary penalties. Currently, the CMA can only enforce consumer law through the courts and is not able to impose fines on businesses for violating consumer law.
As part of this new “administrative enforcement model,” the CMA will have the power to investigate suspected infringements and issue associated notices to businesses when the CMA determines they are in violation of consumer law. Additionally, the CMA is empowered to impose fines of up to 10% of a business’s annual global turnover for any breach of UK consumer law.
Key points of the draft guidance
The draft guidance includes details on how CMA investigations under the DMCC Act will proceed and information about the CMA’s proposed approach to penalties and settlement.
The CMA outlines four stages of the direct consumer enforcement process, beginning with the pre-launch, when the CMA decides whether to open a formal investigation or to use another consumer enforcement route. If the CMA moves forward with a formal investigation, it may publish a public announcement of the investigation and identify the parties involved and the matters under investigation. The next stage is investigation, during which the CMA may make use of compulsory powers to gather information. The DMCC Act introduced new penalties for non-compliance with information notices or for providing false or misleading information.
As a result of the investigation, the CMA may issue a Provisional Infringement Notice (PIN) if it believes a company violated consumer law. The company will have the opportunity to provide written and oral representations in response, after which the CMA will issue a Final Infringement Notice (FIN) if it finds the company has committed a consumer law infringement. The CMA will also issue a press announcement and publish the details of its decision on its website following the issuance of a FIN. The final stage of the process is post-decision, during which a company may issue an appeal.
The CMA’s draft guidance also outlines when the CMA will accept an undertaking and when it will proceed with a settlement. These undertakings and settlements align with the monetary penalty amounts outlined in the DMCC Act, which could be up to 10% of a company’s annual global turnover. In addition to monetary penalties, the CMA can also pursue other remedies such as directions and Enhanced Consumer Measures (ECMs).
Looking ahead
The CMA opened a consultation window on its draft guidance, offering stakeholders the opportunity to provide feedback on the direct consumer enforcement process. The consultation closed on 11 September 2024. The CMA will adjust the draft guidance as it sees fit after reviewing the stakeholder feedback.
The CMA is also working on draft guidance related to the consumer law changes introduced under the DMCC Act and is expected to publish it for consultation later this year. With the DMCC Act expected to come into force in spring 2025, companies should be preparing now for the CMA’s enhanced enforcement powers. Companies should also review and update their recall and communications plans to ensure they are prepared for any product-related in-market events and are ready to communicate effectively with customers.
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