Top 10 hot topics in consumer law, advertising and digital regulation … – Lexology

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After a substantial period of political uncertainty in the UK, 2023 sees a shift in focus, and is already shaping up to be the year of significant legislative and regulatory reforms, including wide-ranging changes to competition and consumer laws and the introduction of landmark pieces of new digital regulation. At the same time, UK regulators with a consumer protection remit such as the Competition and Markets Authority (CMA), the Advertising Standards Authority (ASA), the Information Commissioner’s Office (ICO), the Gambling Commission, the Office of Communications (Ofcom) and the Financial Conduct Authority (FCA) are collaborating together more than ever in an effort to be more proactive and deliver a joined-up approach to regulation.
All of this means that there is a vast amount of regulatory change and increased enforcement activity expected in 2023. We’ve set out below our top 10 hot topics in consumer law, advertising and digital regulation for consumer-facing businesses to keep on their radar over the course of the next 12 months, as well as possible actions to take in readiness for the changes.
If you would like to discuss any of these topics in more detail then please do get in touch. We’ll also be running a series of in-depth seminars during the course of 2023 that will examine many of these topics in greater detail. Please contact us if you’d like to sign up to our International Business-to-Consumer Group mailing list and receive more details.
Consumer
1. Fines for breaches of consumer law
The UK's Digital Markets, Competition and Consumer Bill is expected to be published by March this year, and could become effective as soon as October 2023. The proposals will significantly reform competition and consumer law in the UK if passed, including giving the Competition and Markets Authority (CMA) new powers to fine companies up to 10% of global turnover for breaches of consumer law.
The UK’s reforms follow significant consumer law reforms in the EU following the introduction of the Omnibus Directive, and we expect to see the first wave of enforcement action by European regulators later this year.
Action: Brands are advised to review consumer contracts, user journeys and overall product compliance to avoid fines, regulatory investigations and unwanted negative PR. For more information about the UK’s proposed reforms, please see our article here.
2. Tackling subscription traps
The UK’s consumer law reforms will particularly focus on tackling subscription traps and we expect the UK government to introduce specific legal obligations on subscription providers to: (a) provide mandatory pre-contract information to consumers; (b) send reminder emails to consumers before a contract auto-renews; and (c) ensure that consumers have a straight-forward, cost-effective, and timely mechanism to terminate the subscription contract. These proposals build on the existing sector-specific enforcement work that the CMA has already undertaken in relation to subscription sales, for example in the anti-virus software sector.
The desire to make subscription contracts easier for consumers to cancel is shared by lawmakers and regulators across the EU, with Germany recently introducing a mandatory two-click cancellation process for subscription contracts, and the European Commission seeking commitments from Amazon to remove various barriers to cancellation from all of its EU websites and for all devices.
Action: Businesses selling subscriptions to consumers are encouraged to carry out a compliance audit of existing practices and prepare for more changes in 2023.
3. Addressing fake reviews
The UK government is also planning to crack down on the use of fake reviews online. Proposals are underway to amend Schedule 1 of the existing Consumer Protection from Unfair Trading Regulations 2008 to clarify that it is always an unfair commercial practice to: (a) commission or incentivise any person to write and/or submit a fake consumer review of goods or services; and (b) offer or advertise to submit, commission or facilitate fake reviews. The proposals will also introduce an obligation on traders to take reasonable and proportionate steps to check reviews are genuine before they are hosted, requiring for the first time traders to implement a process (whether manual or automatic) to verify the genuineness of reviews before they appear on their websites.
The UK’s proposals are similar to those already introduced in the EU by the Omnibus Directive, however we’re yet to see if the UK will also require businesses to communicate to consumers what processes and procedures are in place to ensure reviews are genuine.
Action: Businesses who display customer reviews will need to examine their policies and processes to ensure that sufficient measures are in place to stop fake reviews from being posted online. This may mean requiring a reviewer to verify that they have actually used or purchased a product or, where a third party review service is integrated into a website (e.g. Trustpilot), to ensure that the third party is complying with the new requirements.
Advertising and consumer
4. Online choice architecture and ‘dark patterns’
The focus on ‘subscription traps’ forms part of a broader conversation about online choice architecture and so-called ‘dark patterns’ i.e. digital design that deceives or manipulates consumers into making certain decisions, potentially resulting in consumer harm.
In the UK, the CMA has launched a consumer enforcement programme focusing specifically on online choice architecture, starting with an investigation into Emma Sleep and whether the retailer misled consumers by using countdown timers and time-limited claims to suggest a greater saving than is actually the case. We expect more investigations will be launched this year as the CMA steps up its review of potentially harmful online selling practices. Such action is likely to be undertaken in tandem with the Advertising Standards Authority.
Online choice architecture and dark patterns is also squarely on the radar of other regulators. The Federal Trade Commission (FTC) in the United States recently released a staff report entitled ‘Bringing Dark Patterns to Light’ which highlights the FTC’s concern that dark patterns are being used to trick consumers into buying products or services or sharing their personal data. In the EU, an express ban on dark patterns was recently introduced as part of the Digital Services Act and the European Commission is currently consulting on the Fitness Check of EU consumer law to examine whether further legislation is needed to ensure equal fairness online and offline. The consultation closes on 20 February 2023.
Action: We encourage businesses, if not doing so already, to conduct compliance programmes, including behavioural audits or other forms of self-assessment, to determine whether the use of online choice architecture is consistent with consumer protection and competition law. Equally, if businesses are concerned about the practices being used by competitors, feel free to contact us to see how we may be able to support you in submitting a response to the European Commission’s consultation.
5. Environmental claims
There is no doubt that environmental claims will be under increased regulatory scrutiny in 2023. Companies will need to think long and hard before using general terms such as 'eco', 'eco-friendly', 'green' or 'sustainable' to describe products, services or brands.
The EU's proposal for new legislation to prohibit unsubstantiated green claims and introduce other measures to tackle greenwashing is expected to be formally adopted by EU Member States this year.
Action: We recommend seeking legal advice before making environmental claims to ensure that such claims are accurate, true, clear, substantiated and not misleading. Any accusation of greenwashing can significantly damage a business’s goodwill and reputation and the costs to correct any misleading claims can be huge, particularly if the claims have been printed on products or packaging.
With consumers expected to spend less on non-essential items in 2023, brands will need to do more to entice customers, e.g., through discounting, promotional offers and marketing campaigns that emphasise savings and value. We expect that both consumers and regulators will be carefully monitoring offers and savings claims in 2023 to ensure that they are genuine and not misleading.
In the EU, specific rules now apply to price reduction announcements with a new requirement to display the lowest price offered for the discounted item in the last 30 days.
Action: Understand the rules applicable to price promotions, in particular, the use of strike-through pricing, % off claims, and conditional purchases. See here for a quick summary of things to watch out for when carrying out price promotions.
7. Influencer marketing
Influencer marketing has always been a hot topic in advertising, however the ASA is now stepping up its enforcement action to ensure that commercial content is adequately disclosed to consumers.
In an effort to increase compliance with the rules, the ASA has set up a webpage to name and shame the biggest offenders and also uses free media provided by platforms to publish adverts targeting influencers’ followers to highlight the non-compliance. It is also harnessing artificial intelligence to automatically detect undisclosed commercial content and working with platforms to take action. The CMA has taken this one step further by reminding platforms of their statutory duty to act with professional due diligence and facilitate compliance with consumer law. The CMA has developed six key compliance principles for platforms to follow to help tackle hidden advertising online and we expect the CMA to take enforcement action (potentially using its new powers) against any platform that fails to take the recommended steps. It will be interesting to see whether relying on platforms in this way will lead to higher levels of compliance.
Other regulators in the EU are also being very proactive in this space, with the Danish Consumer Ombudsmen reporting influencers to the police so that they can be fined, and the Polish Competition and Consumer Protection body also investigating and fining six of Poland’s best-known social media influencers.
Action: Any commercial content must be adequately disclosed as such, typically by using the #ad or #advert label. Different rules apply in different countries and advertisers are advised to check local laws before partnering with influencers or affiliates for international marketing campaigns.
8. Marketing NFTs and cryptoassets
The rise in the promotion of cryptoassets over the last few years has come under the spotlight of regulators as they are perceived to be complex and volatile products. Ensuring that these products are marketed responsibly has become a ‘red alert’ priority issue for the ASA, and last year it banned several crypto adverts and issued an Enforcement Notice to over 50 companies in an effort to seek better levels of compliance with the rules. Looking ahead to 2023, a last minute change to the Financial Services and Markets Bill in the UK could mean that all cryptoassets fall within the FCA’s remit and be subject to the rules on financial promotions and other rules for high risk investments, for example, personalised risk warnings and possible cooling off periods.
Action: The details are yet to be ironed out, but we expect that the promotion of cryptoassets will become much more regulated and advertisers should seek legal advice before devising and implementing marketing campaigns for cryptoassets.
9. The FCA’s new Consumer Duty
The FCA has introduced a new Consumer Duty into the FCA’s principles for businesses, which aims to increase the current level of consumer protection in the retail financial services market by setting clearer and higher standards for the culture of firms and the conduct the FCA expects of them. Firms will be required to consider the impact of the products and services they sell to consumers both at pre-sale and post-sale stages, ensuring that consumers always receive: (a) communications they can understand; (b) products and services that meet their needs and offer fair value; and (c) get the customer support they need, when they need it. The FCA is giving firms until 31 July 2023 to implement the new rules for all new and existing products and services that are currently on sale. The rules will be extended to closed book products 12 months later.
Action: The new Consumer Duty will lead to a major shift in how financial services are delivered and firms will need to adapt their governance mechanisms to ensure their regulatory compliance with the requirements set out in the Consumer Duty. For more information, please see our update here and the FCA’s final guidance here.
Digital regulation
10. Online safety and other digital regulations
2023 will be the year of digital regulation, marking a dramatic shift in the legal landscape for online platforms and search engines in the UK and elsewhere.
In respect of online safety, new digital legislation includes the UK's Online Safety Bill, the EU's Digital Services Act, Ireland's Online Safety and Media Regulation Act 2022, California's Age-Appropriate Design Code Act, Australia's Online Safety Act 2021 and Singapore's Online Safety (Miscellaneous Amendments) Bill.
In respect of competition within digital markets, the EU’s Digital Markets Act is already in force and will apply from May 2023, and the UK has also recently established its Digital Markets Unit (DMU) within the CMA. Powers for the DMU and the new regulatory regime will require legislation which will be in the form of the UK's Digital Markets, Competition and Consumer Bill.
In the EU, both the Digital Markets Act and Data Governance Act take effect this year, and we expect that the AI Act, AI Liability Directive, Data Act and Cyber Resilience Act will reach the end of the legislative process.
More regulatory changes are also anticipated in the privacy space, with the UK’s Data Protection and Digital Information Bill and possible revised EU e-Privacy Regulation potentially coming into force, leading to higher fines for e-privacy breaches.
Action: The tsunami of digital regulation will keep legal and compliance teams in digital businesses busy throughout 2023 and beyond. We are currently assisting many of these businesses to navigate the complex regulations and create practical compliance plans that can be implemented on a global basis.
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