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Digital Markets, Competition and Consumers Act 2024

Contents

Legal background

Digital Markets

  1. The new digital markets regime is a legal framework containing new functions for the CMA to impose ex ante regulation for digital markets. The exercise of these functions in practice will be overseen by the Digital Markets Unit, an administrative unit of the CMA. The regime builds on the UK’s existing competition legislative framework, of which key sources of law include the Competition Act 1998, the Enterprise Act 2002 and the Enterprise and Regulatory Reform Act 2013. A fuller legislative history of the existing competition legislative framework appears below in the section about the competition provisions in Part 2 of the Act.
  2. The design of the digital markets regime takes account of the interaction between the new CMA regime and existing functions of other regulators active in digital markets by requiring the CMA to consult those other regulators in certain circumstances where there may be an effect on or in relation to their relevant functions. The relevant functions of other regulators arise under other legislative regimes: the competition functions of the Financial Conduct Authority (in the Financial Services and Markets Act 2000) and the Office of Communications (in the Communications Act 2003); the functions of the Information Commissioner relating to the protection of personal data (under the Data Protection Act 2018 and other enactments); and the functions of the Bank of England relating to its financial stability objective as set out in section 2A of the Bank of England Act 1998.

Competition

  1. Part 2 of the Act makes amendments across the UK’s legislative framework regarding competition, set out in Part 1 of the Competition Act 1998, Parts 3, 4 and 6 of the Enterprise Act 2002 (concerning merger control, market studies and investigations, and the cartel offence respectively), and to a variety of other pieces of legislation in order to enhance the investigative and enforcement powers available for the purposes of the competition regime. The principal regulator responsible for the public enforcement of competition law is the Competition and Markets Authority (the CMA), which was established by the Enterprise and Regulatory Reform Act 2013, to replace the Office of Fair Trading and the Competition Commission.

Anti-competitive agreements and abuse of a dominant position in a market

  1. The Competition Act 1998 replaced the Restrictive Practices Court Act 1976, the Restrictive Trade Practices Act 1976, the Resale Prices Act 1976 and the restrictive Trade Practices Act 1977. Part 1 of the Act established two central prohibitions: the Chapter I prohibition against anti-competitive agreements and the Chapter II prohibition against the abuse of a dominant position in a market which came into force on 1 March 2000.
  2. Chapter 3 of Part 1 of the Competition Act 1998 makes provision regarding the investigation and enforcement of the prohibitions by the CMA. Amendments to provisions in Chapter 3 were made by the Competition Act 1998 and Other Enactments (Amendment) Regulations 2004 (S.I. 2004/1261) in order to implement EU obligations set out in Council Regulation (EC) No 1/2003 of 16 December 2002 on the implementation of the rules on competition laid down in Articles 81 and 82 of the Treaty, and for the alignment of the domestic competition regime with the new European regime. The majority of those amendments came into force on 1 May 2004.
  3. Chapter 4 of Part 1 of the Competition Act 1998 deals with both appeals against CMA decisions, which are made to the Competition Appeal Tribunal ("the CAT") and proceedings and settlements in relation to competition law. Private law claims may be pursued for breaches of the infringements and such claims may be made before the courts or the CAT. Amendments to provisions in Chapter 4 were made by the Claims in respect of Loss or Damage arising from Competition Infringements (Competition Act 1998 and Other Enactments)(Amendment) Regulations 2017 (S.I. 2017.385) in order to implement in part Directive 2014/104/EU of the European Parliament and of the Council of 26 November 2014 on certain rules governing actions for damages under national law for infringements of the competition law provisions of the Member States and of the European Union ("the Damages Directive") and for the alignment of the domestic competition regime with the provisions in the Damages Directive.
  4. Further amendments were made to both Chapters 3 and 4 of Part 1 of the Competition Act 1998 by the Competition (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/93) to correct deficiencies arising as a result of the UK’s withdrawal from the European Union and ensure the domestic regime operates on a freestanding basis. These amendments took effect on Implementation Period Completion Day.
  5. Part 6 of the Enterprise Act 2002 which came into force on 20 June 2003 makes provision for an offence relating to hard-core cartels. The offence may be committed by individuals who enter into serious cartel arrangements, that is if they agree with one or more other persons to make or implement certain prohibited cartel arrangements in relation to two or more undertakings, namely price fixing, market sharing, bid rigging and limiting output. Part 6 of the Enterprise Act 2002 contains specific provisions regarding investigation of the offence by the CMA and the powers available to it for that purpose. The offence was modified by the Enterprise and Regulatory Reform Act 2013 to remove a requirement that a person must act dishonestly in order to commit the offence, set out particular circumstances in which the offence is not committed and provide defences to the commission of the offence. The amendments further required the CMA to prepare and publish guidance on the principles to be applied to determine, in any case, whether proceedings for the offence should be instituted. Those amendments came into force on 1 April 2014.

Merger control

  1. The UK’s merger control regime is set out in Part 3 of the Enterprise Act 2002. This replaced the previous public interest test which applied under the Fair Trading Act 1973, and made provision for decisions to be taken in most cases by an independent competition authority against a competition-based test, with a framework for intervention to be made and decision making to rest with the Secretary of State in cases involving a public interest consideration. As originally enacted, functions of the regulator were divided between the Office of Fair Trading and the Competition Commission; those functions now lie with the CMA.
  2. Amendments to Part 3 of the Enterprise Act 2002 were made by the Enterprise and Regulatory Reform Act 2013 in order to introduce statutory time limits and information gathering powers for all parts of the merger review process, introduce a time limited period after a Phase 1 decision where merging parties can offer and negotiate undertakings in lieu of a referral for a more in depth investigation, strengthen the voluntary notification regime by giving the CMA the ability to suspend all integration steps in completed and anticipated mergers, clarify the type and range of measures which the CMA may take to prevent pre-emptive action and introduce financial penalties for breach of CMA interim measures. Those amendments came into force on 1 April 2014.
  3. The turnover and share of supply tests set out in Part 3 were amended by the Enterprise Act 2002 (Turnover Test)(Amendment) Order 2018 (S.I. 2018/593) and the Enterprise Act 2002 (Share of Supply Test)(Amendment) Order 2020 (S.I. 2020/763), the Enterprise Act 2002 (Share of Supply Test) (Amendment) Order 2018 (S.I. 2018/578) and the Enterprise Act 2002 (Share of Supply) (Amendment) Order 2020 (S.I. 2020/748) to create reduced or revised thresholds for businesses active in certain sectors relevant to national security. These amendments were subsequently repealed by the National Security and Investment Act 2021.
  4. Further amendments were made to Part 3 of the Enterprise Act 2002 by the Competition (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/93) to correct deficiencies arising as a result of the UK’s withdrawal from the European Union and ensure the domestic regime operates on a freestanding basis. These amendments took effect on Implementation Period Completion Day.

Mergers involving newspaper enterprises and foreign states

  1. Amendments to Part 3 of the Enterprise Act which require the Secretary of State to give an intervention notice to the CMA where they suspect it is or may be the case that a foreign state merger situation has been created – or will be created as a result of arrangements in progress or in contemplation – are modelled on existing procedures, also in Part 3, which apply to mergers involving media enterprises raising public interest considerations.
  2. Whereas the Secretary of State has a discretion to intervene in public interest cases, and may accept undertakings or impose discretionary remedies to prevent a merger operating against the public interest, the Secretary of State is under an obligation to intervene in a suspected foreign state merger situation and to refer the merger CMA for investigation, and to make an Order to reverse or prevent the merger if the CMA concludes that a foreign state merger situation has resulted or would result if arrangements in progress or in contemplation were carried into effect.
  3. A foreign state merger situation is created where there is a merger involving a newspaper enterprise which has resulted or would result in a foreign power having the ability to control or to influence the policy of the person carrying on the newspaper enterprise. The definition of "foreign power" is based on the definition in section 32 of the National Security Act 2023 but it has been expanded to capture a wider variety of actors including the head or senior members of a foreign government, or an agency or authority of a foreign government or the officers of the governing political party of a foreign government, acting in their private capacity, as well as persons associated with a foreign power, as defined in section 127 of the Enterprise Act 2002.

Market studies and market investigations

  1. The legislative framework concerning the conduct of market studies and market investigations is set out in Part 4 of the Enterprise Act 2002 which came into force on 20 June 2003. Part 4 of the Enterprise Act 2002 replaced the monopoly inquiries regime in the Fair Trading Act 1973 and, as enacted, empowered the Office of Fair Trading, certain sector regulators and, under a reserve power, Ministers, to make a reference to the Competition Commission for a market investigation. As with merger functions, the regime provided for decisions to be taken in most cases by independent competition authorities against a competition-based test, with a framework for intervention to be made and decision making to rest with the Secretary of State in cases involving a public interest consideration.
  2. Amendments to Part 4 made by the Enterprise and Regulatory Reform Act 2013 made provision for the introduction of cross market references, to give the Secretary of State power to request the CMA to investigate public interest issues alongside competition issues as part of a market investigation, to introduce and in some cases, reduce statutory time limits and harmonise information gathering powers for all stages of the markets process, remove a duty to consult on a decision not to make a market investigation reference, other than where there has been a request for a reference to be made, and ensure that the CMA may use interim measures to reverse as well as prevent pre-emptive action during a market investigation. These amendments came into force on 1 April 2014.

The concurrency regime

  1. While the CMA is the principal regulator with responsibility for the public enforcement of competition law, functions of the CMA under Part 1 of the Competition Act 1998, and in effect those functions under Part 4 of the Enterprise Act 2002 which relate to market studies and the making of a reference for a market investigation, are exercisable concurrently by sector regulators; Ofgem, Ofcom, Ofwat, the Northern Ireland Authority for Utility Regulation, the Office of Rail and Road, the Civil Aviation Authority, the Financial Conduct Authority and the Payment Systems Regulator. The regulators have these functions by virtue of provision made by the:
    • Gas Act 1986;
    • Electricity Act 1989;
    • Water Industry Act 1991;
    • Electricity (Northern Ireland) Order 1992;
    • Railways Act 1993;
    • Gas (Northern Ireland) Order 1996;
    • Water and Sewerage Services (Northern Ireland) Order 2006
    • Transport Act 2000;
    • Financial Services and Markets Act 2000;
    • Communications Act 2003;
    • Civil Aviation Act 2012; and the
    • Financial Services (Banking Reform) Act 2013.

Information

  1. Part 9 of the Enterprise Act 2002 harmonised the gateways applicable to the disclosure of information relating to competition and consumer matters, making provision for the protection of "specified" information and setting out gateways allowing for disclosure. Specified information is information obtained by a public authority in connection with the exercise by it of any function it has under Parts, 1, 3, 4, 6, 7, or 8 of the Enterprise Act 2002, or any enactment listed in Schedule 14 to that Act, or which may be specified in secondary legislation by the Secretary of State.
  2. As enacted, Part 9 made provision so that such information may be disclosed both within the UK and overseas to enable a public authority to facilitate the exercise of its own statutory functions, and certain statutory functions of other persons, and for the purposes of any criminal investigations or proceedings. It also provided for more limited disclosure to overseas authorities for the purpose of any criminal investigations or proceedings. However, in relation to disclosure overseas for the purpose of civil proceedings, it provided for information to be disclosed only to those public bodies involved in the enforcement of consumer or competition legislation. In addition, competition information obtained under the Financial Services and Markets Act 2000 and certain sensitive commercial information (for example, information connected to market and merger investigations) was expressly excluded from the overseas gateway.
  3. Amendments made since Part 9 was enacted include the addition of a gateway for disclosure for the purposes of prescribed civil proceedings by the Companies Act 2006, the removal of the gateway in relation to EU obligations by the Competition (Amendment etc.) (EU Exit) Regulations 2019 (S.I. 2019/93), and the removal of the restriction on sending overseas information connected to a merger investigation by the National Security and Investment Act 2021. In addition, in particular through the subsequent addition of more enactments, such as legislation relating to the Pubs Code in England and Wales, to Schedule 14 of the Enterprise Act 2002, the range of information covered by the Part 9 gateways has been expanded beyond that obtained in connection with purely competition and consumer protection related functions.

Competition in the retail market for motor fuel

  1. Chapter 1 of Part 5 introduces new information gathering powers for the CMA in relation to the monitoring of competition in the retail of motor fuel. These powers are similar to existing information gathering powers contained within the Enterprise Act 2002, in particular, those contained under section 174, but are focused to specifically address the retail of motor fuel.

Enforcement of Consumer Protection Law

  1. Part 3 of the Fair Trading Act 1973 gave the Director General of Fair Trading the power to take action against traders who breached their legal obligations to the detriment of consumers.
  2. The Stop Now Orders (E.C. Directive) Regulations 2001, which came into force on 1 June 2001, implemented Directive 98/27/EC on Injunctions for the Protection of Consumers’ Interests. The Regulations empowered certain public bodies (including the Director General of Fair Trading) to stop traders infringing listed UK legislation, which implemented specific EU consumer protection laws, where the breach harms the collective interest of consumers (‘Community Infringements’).
  3. This resulted in two similar, but separate, regimes for the public enforcement of consumer protection law: a regime for breach of consumer protection laws of UK origin under Part 3 of the Fair Trading Act 1973 (FTA) and a regime for Community Infringements under the Stop Now Orders (E.C. Directive) Regulations 2001.
  4. Part 8 of the Enterprise Act 2002 was enacted to provide for a court-based unified enforcement regime for the two categories of Community Infringements and infringements of consumer protection laws of UK origin, where there was harm to the collective interests of consumers (the "enforcement regime"). It replaced Part 3 of FTA 1973 and the Stop Now Orders (EC Directive) Regulations 2001, subject to transitional provisions.
  5. Since its coming into force, Part 8 of the Enterprise Act 2002 has been amended many times. In particular:
    1. Section 79 and Schedule 7 of the Consumer Rights Act 2015 amended Part 8 to give the civil courts and public enforcers flexibility and powers to provide redress for consumers, to require positive, corrective action by traders and to broaden the extra-territorial extent of Part 8.
    2. The Consumer Protection (Enforcement) (Amendment etc.) Regulations 2020/484 implemented certain provisions of Regulation (EU) 2017/2394 of the European Parliament and of the Council of 12 December 2017 on co-operation between national authorities responsible for the enforcement of consumer protection laws. In particular, the Regulations added additional EU Directives and Regulations into the scope of the enforcement regime and introduced new concepts of interim and final online interface orders into the enforcement regime.
    3. The Consumer Protection (Enforcement) (Amendment) (EU Exit) Regulations 2019 (S.I. 2019/203) and the Consumer Protection (Enforcement) (Amendment etc.) (EU Exit) Regulations 2020. These gave effect to the implications for the enforcement regime resulting from the decision of the UK to leave the EU. As a result, with effect from 1 January 2021, the category of "Community Infringements" was replaced with "Schedule 13 infringements". The category of "Community Infringements" continues to apply, however, in relation to conduct to the extent that it occurred before 11pm on 31 December 2020.
  6. As a result of these changes, there are two categories of infringement to which the enforcement regime set out in Part 8 of the Enterprise Act 2002 applies:
    1. domestic infringements (consumer protection laws of UK origin) (section 211 of the Enterprise Act 2002), and
    2. Schedule 13 Infringements (formerly Community infringements) (section 212 of the Enterprise Act 2002).
  7. There are three categories of enforcer who can use the enforcement regime, although many enforcers feature in more than one category:
    1. General enforcers (section 213 (1) of the Enterprise Act 2002). General enforcers can use the enforcement mechanism in respect of any infringement, i.e. both kinds of infringement (domestic and Community infringements);
    2. Designated enforcers (enforcers designated by order made under s.213(2) of the Enterprise Act 2002). A number of orders have been made under section 213: the Enterprise Act 2002 (Part 8 Designated Enforcers: Criteria for Designation, Designation of Public Bodies as Designated Enforcers and Transitional provisions) Order S.I. 2003/1399, the Enterprise Act 2002 (Part 8) (Designation of the Consumers’ Association) Order S.I. 2005/917 and the Enterprise Act 2002 (Part 8) (Designation of the Financial Conduct Authority as a Designated Enforcer) Order S.I. 2013/478). These enforcers have all been designated as able to use the enforcement mechanism in relation to any infringement; and
    3. Schedule 13 enforcers (section 213 (5A) of the Enterprise Act 2002) These are the enforcers designated under Regulation (EU) 2017/2394 or its predecessor and are able to use the enforcement mechanism in relation to Schedule 13 infringements only.
  8. Part 3 of the Act replaces Part 8 of the Enterprise Act 2002 for conduct which takes place after commencement (subject to the additional transitional provisions made by Schedule 19 and through secondary legislation). It provides for a single category of infringement instead of the two categories of infringements, described above, which feature in Part 8 of the Enterprise Act 2002. Part 3 extends the power to apply to the courts for Online Interface Orders and Interim Online Interface Orders, previously limited to the CMA, to all public enforcers. It also makes additional incidental changes, as well as changes to simplify and consolidate Part 8 of the Enterprise Act 2002 and legislation made under it.

Investigatory powers for consumer protection law enforcement

  1. Section 77 and Schedule 5 to the Consumer Rights Act 2015 make provision for the information gathering and investigatory powers of consumer law enforcers. They provide a generic set of powers, which were based on the powers previously set out in Part 4 of the Consumer Protection from Unfair Trading Regulations 2008.
  2. There are three main types of investigatory powers:
    1. the power to send statutory notices to request information;
    2. the power to purchase products and observe business; and
    3. the power to gather evidence on premises.
  3. Paragraphs 13 to 17 of Part 3 of Schedule 5 to the Consumer Rights Act 2015 provide consumer law enforcers with a power to request information by notice. These paragraphs set out the purposes for which the power can be used, the procedure to be followed when using it and how the power can currently be enforced, as well as limitations on the use of the information obtained.
  4. Part 4 of Schedule 5 to the Consumer Rights Act 2015 contains further powers permitting entry to premises, under warrant and without a warrant, and the exercise of a range of powers while on the premises. The powers are only available to domestic enforcers and Schedule 13 enforcers, for specified purposes and on the conditions prescribed. The conditions on which a justice of the peace may issue a warrant include being satisfied of reasonable grounds for believing that on the premises are documents which an enforcement officer could require a person to produce.
  5. The onsite investigatory powers available to enforcement officers include a power to require the production of, and take copies of, documents, including electronically recorded information. Documents can be seized where required as evidence in proceedings. The production and seizure powers may not be exercised in relation to material protected by legal professional privilege or confidentiality of communications. Furthermore, an enforcement officer may require a person on the premises to access any electronic device in which information may be stored or from which it may be accessed and (if the person fails to comply) to access such electronic device himself.
  6. Currently, the four categories of enforcers with access to the investigatory powers are:
    1. domestic enforcers (paragraph 3 of Schedule 5);
    2. Schedule 13 enforcers (paragraph 4 of Schedule 5);
    3. public designated enforcers (paragraph 5 of Schedule 5); and
    4. unfair contract terms enforcers (paragraph 6 of Schedule 5).
  7. Many enforcers feature in more than one category, for example, the CMA is a domestic enforcer, Schedule 13 enforcer and unfair contract terms enforcer.
  8. Section 208 and Schedule 17 amend Schedule 5 to the Consumer Rights Act 2015 to, amongst other changes, enhance the enforceability of statutory information notices given to a person under paragraph 14 of Schedule 5 and to set out the extra-territorial reach of enforcers’ powers to request information by notice. The amendments abolish the legacy categories of Schedule 13 infringements and Schedule 13 enforcers throughout Schedule 5 to the Consumer Rights Act 2015.

Consumer Rights and Disputes

Protection from Unfair Trading

  1. Chapter 1 of Part 4 replaces the Consumer Protection from Unfair Trading Regulations 2008 (with some amendments). In particular, Chapter 1 of Part 4 introduces more detailed provisions to address drip pricing (section 230) and practices related to fake reviews (at paragraph 13 of Schedule 20). Part 3 provides for the civil enforcement of Chapter 1 of Part 4 by authorised enforcers in order to prevent harm to the collective interests of consumers.
  2. The Consumer Protection from Unfair Trading Regulations 2008 prohibit unfair commercial practices. A commercial practice is unfair if it contravenes the requirements of professional diligence so as to materially distort (or is likely to) the behaviour of the average consumer, is a misleading action, misleading omission, aggressive commercial practice or is listed in Schedule 1 to the Regulations. The Consumer Protection from Unfair Trading Regulations 2008 implemented Directive 2005/29/EC of the European Parliament and of the Council of 11 May 2005 concerning unfair business-to-consumer commercial practices in the internal market. Notwithstanding the repeal of the European Communities Act 1972, the Consumer Protection from Unfair Trading Regulations 2008 continue in force, as a result of section 2 of the European Union (Withdrawal) Act 2018.
  3. The Consumer Protection from Unfair Trading Regulations 2008 extend to England and Wales, Scotland and Northern Ireland.
  4. The Consumer Protection from Unfair Trading Regulations 2008 can currently be enforced by authorised enforcers through the enforcement mechanism provided by Part 8 of the Enterprise Act 2002 in order to prevent harm to the collective interests of consumers.

Subscription Contracts

  1. Chapter 2 of Part 4 provides consumers with significant new rights in relation to subscription contracts and, for these contracts, replaces the two main parts of the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013 ("CCRs") on pre-contract information and cooling-off cancellation rights with tailored provisions applicable to subscription contracts. Chapter 2 aims to create a new regime integrating consumers’ key rights under the CCRs with a set of new statutory rights so as to create a consolidated regime for the regulation of subscription contracts in one enactment. These private law rights are directly enforceable by consumers. In addition, Part 3 provides for the public civil enforcement of Chapter 2 of Part 4 by authorised enforcers in order to protect the collective interests of consumers.
  2. In these Notes, the term "subscription contract" is used with the meaning given by section 254. There are several consumer protection enactments and rules of law which are relevant to subscription contracts as a category of consumer contracts, detailed below.
  3. Firstly, the CCRs. These regulations apply to contracts between traders and consumers (apart from certain excluded contracts) and, in particular:
    1. require traders to provide certain pre-contract information to consumers and do so ‘in a clear and comprehensible manner’ before the consumer is bound by the contract. By virtue of provisions in Part 1 of the Consumer Rights Act 2015, this statutory pre-contractual information is to be treated as amounting to implied terms of the contract and is therefore legally binding on the trader in the same way as what is said in the contract itself, and
    2. provide consumers with cancellation rights to cancel so-called distance or off-premises contracts shortly after entering the contract (sometimes known as cooling-off cancellation rights) without giving any reason or incurring any costs other than those specified.
  4. The CCRs implemented most of the provisions of Directive 2011/83/EU of the European Parliament and of the Council of 25 October 2011 on consumer rights. Notwithstanding the repeal of the European Communities Act 1972, the CCRs continue in force, as a result of section 2 of the European Union (Withdrawal) Act 2018.
  5. The CCRs extend to England and Wales, Scotland and Northern Ireland.
  6. The CCRs contain provisions for civil enforcement by the specified enforcement authorities, as well as provision for criminal enforcement of specific requirements relating to the provision to consumers of pre-contract information on cooling-off cancellation rights in the case of off-premises contracts. In addition to these enforcement provisions, the requirements of the CCRs as a whole can currently be enforced by authorised enforcers through the enforcement mechanism provided by Part 8 of the Enterprise Act 2002 in order to prevent harm to the collective interests of consumers.
  7. Secondly, the Consumer Protection from Unfair Trading Regulations 2008, which are replaced by Chapter 1 of Part 4. Further background in relation to the Consumer Protection from Unfair Trading Regulations 2008 is set out above.
  8. Thirdly, the Consumer Rights Act 2015. Part 1 of the Consumer Rights Act 2015 implies terms into consumer contracts for the supply by traders to consumers of goods, digital content and services, which provide for a range of essential rights under such contracts including rights that the products supplied are of the agreed quality and description. Part 1 further confers on consumers a range of remedies where these rights are breached. Part 1 restricts traders from contracting out of these statutory rights or remedies. Part 2 of the Consumer Rights Act 2015 clarified and consolidated existing consumer legislation on unfair contract terms and notices and provides that terms in consumer contracts which are unfair according to the statutory test are not binding on consumers.
  9. Apart from one section, Parts 1 and 2 of the Consumer Rights Act 2015 extend to the whole of the UK.
  10. Parts 1 and 2 of the Consumer Rights Act 2015 can currently be enforced by authorised enforcers through the enforcement mechanism provided by Part 8 of the Enterprise Act 2002 in order to prevent harm to the collective interests of consumers. Part 2 and Schedule 3 to the Consumer Rights Act 2015 contain provisions for civil enforcement of Part 2 by the Competition and Markets Authority and other specified regulators.

Insolvency protection for consumer savings schemes

  1. In the Government’s view, consumer savings schemes are not regulated as deposit-takers and many are not subject to any other direct regulation. There is in general currently no legal obligation on these businesses to take steps to protect consumer payments.
  2. Under insolvency law, when such a business becomes insolvent, its remaining assets must be distributed to creditors according to a strict statutory hierarchy. Most of the money will go to those towards the top of the list, such as employees and secured lenders, leaving very little for unsecured creditors such as consumers. Law Commission analysis, produced for the Government in 2016, which reviewed insolvent retailers found that distributions to unsecured creditors were extremely low. If consumers have to rely on receiving a dividend as an unsecured creditor, the return may barely cover the cost of applying for it.
  3. Chapter 3 of Part 4 places a legal obligation on traders who enter into a consumer savings scheme contract to protect payments received from consumers under the contract by way of a trust or insurance, so that the consumer may receive the money back in full, in the event of the trader’s insolvency.
  4. In addition, Part 3 provides for civil enforcement of the relevant provisions of Chapter 3 of Part 4 by authorised enforcers in order to protect the collective interests of consumers.

Alternative dispute resolution ("ADR") for consumer contract disputes

  1. Chapter 4 of Part 4 replaces the Alternative Dispute Resolution for Consumer Disputes (Competent Authorities and Information) Regulations 2015 (SI 2015/542) ("the Regulations"). In addition, Part 3 provides for the civil enforcement of the relevant provisions of Chapter 4 of Part 4 by authorised enforcers in order to protect the collective interests of consumers.
  2. The Regulations provide for the approval by competent authorities against the criteria in Schedule 3 of persons or bodies who seek to become entities accredited to provide ADR in disputes concerning consumer contracts, and ongoing reporting and monitoring of the ADR entities against the criteria. However, a key aspect of the Regulations is that they establish a largely voluntary system. An ADR provider does not have to be approved under the Regulations to offer ADR. The key change brought about by Chapter 4 of Part 4 is (subject to exceptions) to make accreditation compulsory.
  3. The Regulations implemented the EU’s Alternative Dispute Resolution Directive (2013/11/EU). The Regulations continued in force after EU exit, subject to amendment by regulation 9 of the Consumer Protection (Amendment etc) (EU Exit) Regulations 2018 (S.I. 2018/1326).
  4. The Regulations extend to England and Wales, Scotland and Northern Ireland.

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