Is your online business compliant with consumer law?

26th July 2021

The facts are in, and they are a bit surprising…we spent more time online in 2020, but not a lot more. Ofcom’s annual study of our online habits  shows that UK adults spent over 3.5 hours per day online in 2020, only up by 9 minutes per day compared with 2019. Unsurprisingly in the circumstances, we did do a lot more online shopping. Online retail sales increased by 48% to £113bn in 2020. Ofcom cites the closure of physical stores as a key driver but also a diversion to online services when hospitality and travel spending options were not available for consumers. Ofcom’s role in the digital space is set to grow but in the meantime, the key regulator in the arena of internet shopping by consumers is the Competition and Markets Authority (the CMA.)

The CMA is showing sharper teeth in enforcing the central tenet of the Consumer Rights Act; “treating customers fairly”. The CMA issued a press release  setting out commitments from Norton, the anti-virus service provider, to make pricing transparent and fair and for cancellations and refunds of auto-renewing services simpler and easier for customers. This followed the launch of legal action to force Norton to co-operate with its investigation into the anti-virus market, similar commitments from McAfee and an insistence by the CMA that consumers should be able to cancel contracts that would otherwise auto-renew regardless of terms of business.

The Consumer Rights Act 2015 and associated regulations (Consumer Law) are technically detailed and broadly defined. For example, Consumer Law sets out exactly which pieces of information (24 separate items, no less) an off-premises seller must provide to a consumer. In the absence of the pieces of information, the consumer has a right to bring a breach of contract claim against the seller which could unwind the contract and raise a right to compensation. At the same time Consumer Law also states;

“(1) An unfair term of a consumer contract is not binding on the consumer…

…(4)A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.”

which is as broad as it is long and has been used by consumer groups and the CMA to challenge and reject a series of practices by online retailers. For example, where cancellation fees are charged, these must be justified in relation to the costs to the business of dealing with a cancellation. Whilst convenient for businesses, flat fees/sliding scales cannot be used without supporting evidence that these are reasonable for all consumers, equally. Or, where online services offer comparisons of offers, the ranking of the comparisons must be of interest to the consumer (say by price, location, compatibility with filters) rather than ranked to the benefit of the service (commission levels, importance of client, promoting overstocked products.)

The CMA makes no bones about its absolute right to name (and generally shame) the entities it is investigating. In its recent note “Transparency in Consumer Enforcement Cases – Updated Supplementary Note,” the  CMA noted

“…[in its] experience of consumer enforcement cases is that there is a clear public interest in the transparency of such work. Sharing information about its consumer cases – including, where appropriate, the names of parties – can facilitate the performance of the CMA’s functions by, among other things:

  • encouraging business and consumers to come forward with information that can assist the CMA’s investigation and protection of the public in appropriate cases
  • enhancing consumer and business understanding of when the CMA does, and does not, consider it appropriate to take enforcement action in relation to consumer law infringements
  • keeping the public informed of the progress of a case, including to make clear when businesses in a sector are not under investigation, and
  • developing public confidence in consumer markets and the consumer protection regime as a whole, by demonstrating how the CMA is acting to ensure that consumer law is complied with.”

What this means for businesses, is that as online retailing grows, it is important to pay close attention to ensure the method of sale is fair and the technicalities (all 24 items) are covered when finalising the technical design of the consumer interface.

If you would like your interface to be reviewed or need advice when setting up please contact Simon Halberstam.