Extra protections needed for consumers in the fast-moving online marketplace

A blog post by Consumer Scotland Head of Policy and Markets Tracey Reilly

The House of Commons is currently considering the Digital Markets, Competition and Consumers Bill. Consumer Scotland has provided written and oral evidence to the Bill Committee scrutinising the Bill.

The Bill is a large and wide-ranging piece of legislation which aims to address issues around how our fast moving and innovative online markets work. While consumers often benefit from technological innovations, the fast pace with which digital markets can move can leave potential gaps in consumer protection.

The digital market in the UK is dominated by a very small number of large and powerful firms which can, in some circumstances, lead to consumers having less choice, or experiencing detriment in terms of price and service quality. This detriment might mean, for example, that problems with goods or services purchased cause consumers stress, cost them money, or take up their time to resolve issues.

The Bill aims to address these issues by adding extra agility to our regulatory frameworks and by tackling a number of specific areas where consumers have faced detriment.

Broadly speaking Consumer Scotland welcomes the Bill. It provides the Competition and Markets Authority (CMA) with more flexible powers which can be used in a more responsive and timely way to prevent detriment.

The Bill has the potential to improve the experience of individual consumers. We hope that the Bill  will lead to fewer consumers experiencing detriment and being subject to unfair, misleading, or aggressive trade practices. If and when such practices occur, the Bill should mean these can be stamped out more quickly and easily. It should also make it  easier for consumers to resolve any problems through using alternative dispute resolution (ADR) systems that are appropriately regulated and standardised.

The level of detriment experienced by consumers is largely consistent across the UK. Many online purchases do not result in any problems for consumers, and even where there are problems,  most problems are resolved to the satisfaction of consumers. Often consumers who do face negative consequences experienced low-value detriment. However, a small number of problems had a high-value detriment, and the latest Consumer Protection study found that there was £54 billion of aggregate consumer detriment unaddressed across the UK.

While the Bill is welcome there are a number of areas where we believe the scope of the legislation could be extended to the benefit of consumers.

Some markets operate differently in Scotland, either because they are entirely devolved because there are fewer providers and therefore lower levels of competition, or because consumers access services differently, for example, due to geography.

It is important that, within the overall UK framework, the system can respond to those differences across the nations and across local areas. We hope the additional levels of flexibility granted to the CMA under the Bill will allow for a flexible and targeted response to issues experienced by  consumers in Scotland.

Consumer Scotland represents small business as well as individual consumers, but within many of the consumer protection elements of the Bill, consumers are defined as an individual consumer, thus excluding micro and small businesses. Consumer Scotland would welcome further consideration of whether small and micro businesses should benefit from the same protections in the Bill as individual consumers.

A recent CMA investigation found that up to 40% of green claims made by companies offering products online could be misleading to consumers. Just as with fake reviews, so-called greenwashing can lead consumers into making purchasing decisions they may not otherwise make, and therefore infringes the consumer principles of information and choice. It is also an issue that has real risks associated with the net zero transition, as if  consumers are to be empowered to make different choices in terms of what they eat, what clothes they buy, how they heat their houses and what vehicles they drive, then they must  be able to trust the information they are given. Consumer Scotland would welcome consideration of whether greenwashing could be subject to explicit regulation under these powers.

Beyond the measures contained in the Bill, there also remains a significant need for consumer advice and information, along with education, to ensure that consumers are aware of their rights and can access help and assistance to enforce these.

The Bill proposes to introduce a system of accreditation for providers of alternative dispute resolution (ADR) services. ADR is an umbrella term covering a multitude of disciplines, from informal mediation to the use of ombudsman services. The Bill’s proposals are welcome as they should lead to consistency in standards across ADR providers. However, beyond the Bill, there is a need to improve consumer awareness about ADR is if take-up is to be improved. We are also concerned that charging for ADR services will make it harder for people to access them, and this especially the case for consumers who may be in vulnerable circumstances.

Access to ADR helps to resolve disputes but will not in itself stop consumers experiencing issues with goods and services they have purchased. There is potential for issues to be resolved earlier by improving standards of customer service and resolving product quality issues across high-risk markets such as home improvements, furniture or used car sales. This could for example be done through greater promotion of accredited trading schemes where businesses sign up to certain baseline requirements. An improvement in standards in these areas would be likely to result in fewer consumer disputes requiring ADR to resolve them.

The measures in the Bill are a welcome step forward in helping consumers, but more remains to be done. We will continue to engage with the Bill as it moves through the Parliamentary process.