Fake reviews and ‘hidden’ online fees to be banned under new digital markets and consumer protection rules

In a bid to better protect consumers from deceptive practices in the digital economy, the UK Department for Business and Trade announced on 24 January that it is set to introduce stringent measures targeting fake reviews, hidden fees and unclear pricing in the UK.

The new laws aim to modernise and improve the quality and accessibility of information for consumers, particularly in the context of online shopping. They form part of the wider package of consumer law reforms being introduced by the Digital Markets, Competition and Consumers Bill (DMCC Bill).  The DMCC Bill is currently progressing through Parliament and is expected to come into force later this year. 

Background

In April 2023, the Government published its long-awaited DMCC Bill, which (among other reforms) will give the UK Competition and Markets Authority (CMA) significant new consumer protection enforcement powers.[1] The proposals outlined in the DMCC Bill have been heralded by the CMA’s Chief Executive, Sarah Cardell, as a “potential […] watershed moment in the way we protect consumers in the UK”.

Central to the DMCC Bill’s consumer protection reforms are:

• new powers for the CMA to issue infringement decisions for consumer law breaches and impose fines of up to 10% of a company’s global turnover, without having to first apply to court for an enforcement order. In addition, the DMCC bill plans to improve Alternative Dispute Resolution services to deliver swifter redress for harmed consumers; and 
• policy reforms to ensure that existing consumer protections are being updated and modernised to reflect, in particular, the boom in online shopping and significant shifts in consumer purchasing behaviours over recent years.

The Government’s recent announcement relates to the latter aspect of the reforms.  

The Government’s proposals on fake reviews, hidden charges and unclear pricing

Following its September 2023 consultation on a range of proposals to improve price transparency and product information for consumers, the Government has confirmed that it is set to legislate on the following practices.

Fake reviews

Reviews can often play a central role in consumers’ purchasing decisions, with the result that fake reviews can mislead consumers and make it harder for businesses to compete on a level playing field. The CMA has already taken active steps in recent years to tackle such concerns using its existing consumer protection powers.

To address the growing prevalence of fake reviews, however, the Government plans to bolster these powers by adding to the list of specified banned practices in Schedule 19 to the DMCC Bill. The practices in the Schedule are ‘blacklisted’ in that they are automatically considered to be unfair in all circumstances and therefore prohibited, regardless of the likely effect on consumers. The list in the Schedule would replace and restate the equivalent list of banned practices set out in the current Consumer Protection from Unfair Trading Regulations (CPRs), which came into effect in the UK in 2008. 

The following conduct will be added to the list of blacklisted practices:

1. submitting a fake review, or commissioning or incentivising any person to write and/or submit a fake review of products or traders;
2. offering or advertising to submit, commission or facilitate a fake review; and
3. misrepresenting reviews, or publishing or providing access to reviews of products and/or traders without:
   • taking reasonable and proportionate steps to remove and prevent consumers from encountering fake reviews; and
   • taking reasonable and proportionate steps to prevent any other information presented on the platform that is determined or influenced by reviews from being false or in any way capable of misleading consumers.

In its response to the Government’s September 2023 consultation, the CMA was supportive of these proposals and called for some of these practices to attract criminal liability. Having considered the consultation feedback, however, the Government has indicated that these practices will attract civil liability only. It is also worth noting that companies will be required to take proactive steps to comply with the third of these proposals, which effectively creates a positive obligation for businesses to monitor online reviews to check they are genuine. 

Drip pricing and hidden fees

Drip pricing occurs when a consumer is shown an initial price for a product, but additional fees are then added on top as they proceed with the transaction. This practice can occur in both online and offline settings, with “dripped fees” being either mandatory or optional.  According to research commissioned by the Government, “drip pricing is prevalent across the economy” and undermines price transparency, making it difficult for consumers to make informed decisions based on the advertised price of a product or service – particularly when online shopping.

To reinforce existing legal protections on misleading pricing practices, the Government is set to prohibit outright presenting a headline price which does not:

• incorporate in the price any fixed mandatory fees that must be paid by all consumers; and
• disclose the existence of any variable mandatory fees and how they will be calculated.

Importantly, enforcers will no longer have to prove that a failure to present the total price and the existence of any variable fees will cause, or be likely to cause, the average consumer to take a different purchasing decision – as is currently required under the CPRs. In effect, ‘hidden’ mandatory fees and drip pricing practices will therefore become blacklisted (as explained above). Government is not planning, at this stage, to legislate in relation to optional fees such as airline seat choices and luggage upgrades for flights.

Display of pricing information

The Government is also set to reform the Price Marking Order (PMO), a piece of retained EU law. The PMO currently requires traders to display the final selling price and unit price clearly. However, the CMA has found that unit prices are in some cases illegible, obscured or missing for online shoppers or on specific promotions. To address this, and in line with CMA recommendations, the Government has announced that it will work with stakeholders to create new clearer guidance for pricing labels, to help“consumers compare products easily and identify what items represent the best value to them”.

Next steps

The DMCC Bill is expected to receive royal assent later this year. In addition to fake reviews and hidden fees, the DMCC Bill will look at other consumer law issues including subscription traps. For more information on this and the CMA’s new consumer protection enforcement toolkit under the DMCC Bill, see our previous client briefing on this topic. 

Regarding fake reviews in particular, the Government will work with the CMA over the coming months to prepare guidance to help businesses understand their legal obligations. The guidance will provide clarity on what ‘reasonable and proportionate’ steps companies are expected to take to remove and prevent consumers from encountering fake reviews, and to prevent any other information presented on the platform that is determined or influenced by reviews from being false or misleading for consumers.

It is expected that guidance will be principles-based and will reflect the CMA’s recent enforcement experience in this area. The CMA will consult on the guidance before it is finalised, meaning that businesses and other stakeholders will have an opportunity to comment on the standards expected of firms and how the rules will be implemented. 

In practice, businesses that publish or provide access to reviews will need to consider whether their existing consumer protection compliance policies need to be refreshed. In particular, they will need to ensure that they have appropriate protocols in place to meet the CMA’s expectations of ‘reasonable and proportionate steps’ to be taken by companies in respect of fake reviews. While the Government has stated that it will work to ensure that the precise wording of the new banned practices is as clear as possible for businesses to understand and follow, the new rules are still likely to create implementation challenges for businesses, in addition to generating further costs and burden for their compliance function. 

[1] For more information on the other reforms being introduced under the DMCC Bill in respect of digital markets and the CMA’s investigative and enforcement powers in the wider UK competition space, please refer to our Competition and Regulatory newsletter.