New Online Consumer Rights Laws To Come Into Effect

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30 May 2024 – More severe penalties are in store for businesses that mislead customers over online purchases.

The Digital Markets, Competition and Consumers Act (DMCC Act) received Royal Assent on 24 May and will set the tone for consumer laws in digital markets.

The new online consumer rights laws will include more measures to protect consumers from manipulative business practices, especially in subscriptions, pricing, and reviews.

How new online consumer rights laws will affect small businesses

The DMCC Act was first introduced in April 2019 in a bid to “promote growth in the UK economy by ensuring free and vigorous competition amongst businesses.”

At first, it was mainly the answer to rein in tech giants while promoting competition. In its current iteration, the Competition and Markets Authority (CMA) will have the power to manage competition in the digital space.

New responsibilities will include establishing “conduct requirements” that will require a tech company as huge as Meta to change its mode of operation in favour of users.

For small businesses, the DMCC Act will require SMEs to provide clear and precise information regarding subscriptions. Misleading prices will also not be allowed under the newly passed law.

If you’re offering a subscription service, you must make cancellation more accessible and easier for customers.

We’ll explain these main points in further detail below.

Drip pricing

The DMCC Act targets one of the most prevalent issues in online purchases: drip pricing, which occurs when a consumer is enticed by a service or product that is mainly advertised for its affordability.

However, the initial price misleads buyers into thinking they got a pretty good deal. In reality, they will be hit by surprise hidden fees such as booking charges or additional fees during checkout.

This is a pretty common practice in the hospitality (Airbnb) and aviation (seat placement and service fees) industries.

Under the new online consumer rights laws, businesses must disclose the full amount consumers will be paying. If additional charges cannot be calculated in advance, then providers will have to look for alternatives to explain their pricing to consumers clearly.

Fake reviews

fake customer reviews

An April 2023 government report revealed that 1% to 15% of all reviews for products in consumer electronics, home and kitchen, sports and outdoors were fabricated using dummy accounts.

To combat this, the Digital Markets, Competition and Consumers Act will require businesses to take measures to prevent misleading consumer reviews.

For SMEs, this will mean personally moderating, discouraging, and deleting fake reviews from your own online shopfront.

Online marketplaces like Amazon will likely remove suspected reviews. SMEs may expect a sudden purge in customer feedback.

Predatory subscription contract traps

The new laws protecting consumers online will obligate businesses to disclose clear and easily understandable terms for subscription contracts.

The DMCC Act further clarifies the following terms in favour of consumers:

1. The consumer’s right to cancel

The consumer can cancel a contract within the initial cooling-off period and any renewal cooling-off period. A full refund is issued if the contract is cancelled between 14 days from the initial signing and renewal.

2. Notifications given by providers

Businesses will have to send out notices to consumers for important information. This will include when the subscription starts and ends, a continuation of the cooling-off period, how to cancel, etc.

Penalties for non-compliance

Non-compliance may result in a penalty of up to £300,000 or 10% of a business’s annual turnover (whichever is higher) for consumer law infringements.

On the other hand, failing to comply with an undertaking or direction may result in a fine of up to 5% of a business’s annual global turnover.

These numbers may be devastating for a small business. However, the laws are poised to target the most influential global technology companies.

If companies fail to comply with decisions made by the CMA, they could be subject to fines reaching tens of billions of pounds. These fines and other measures will be balanced by rigorous checks and balances.

Official Government Announcement

The DMCC Act is expected to be fully implemented in autumn.

Our opinion

Small businesses shouldn’t be too worried about these new online consumer rights laws, because they target practices that most SMEs don’t apply. Like any laws, they aim at stopping businesses from doing the wrong or unethical things.

While it’s worth for any UK business to have a good understanding of what the laws say and what they mean for them, there is one sure way to keep on the right side of the law. Treat your customers fairly, honestly and with respect.

If you do that, you won’t use any of the practices that are targeted by this newly passed legislation. But there is more to it. If consumers can see that you treat them well, they are more likely to keep coming back and become loyal customers.

So take these new laws as an opportunity to review your business practices and marketing strategies and ensure that you run your business in an ethical way. This will protect you from non-compliance to the laws and potentially increase your customer base.

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The Business4Beginners news team consists of several writers who each have their own unique experience in businesses. By keeping their fingers on the pulse, they bring you the latest in news and trends impacting small UK businesses.
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