Under the Digital Markets, Competition and Consumers Act 2024, businesses can face severe penalties from the UK’s Competition and Markets Authority for non-compliance with UK consumer law.
Earlier this year, the CMA launched investigations into major tech companies under the DMCCA.
Two of the investigations involve Apple and Google’s mobile ecosystems, namely how their control over mobile operating systems, app stores, and web browsers may impact competition and consumer choice in the UK.
These investigations highlight the stringent regulatory environment in which businesses now operate under UK consumer law.
David Wozniak, associate solicitor in Muckle LLP’s commercial team, explains more.
The consequences
1. Financial penalties on companies
The CMA has the power to directly impose financial penalties on businesses for consumer law breaches without having to issue proceedings through the courts.
This represents one of the most significant changes in consumer law introduced by the DMCCA.
2. Fines for unfair commercial practices
For “unfair commercial practices” such as drip pricing (showing the consumer an initial headline price for a product and then adding further mandatory charges during the purchasing process) and other misleading practices, businesses can be fined up to £300,000 or 10% of their global annual turnover (whichever is higher).
Fines for SMEs may amount to hundreds of thousands of pounds, while large corporations could face penalties in the millions or even billions.
The 10% global annual turnover penalty limit under UK consumer law mirrors the maximum fine businesses can face for substantive breaches of UK competition law.
In certain circumstances, the DMCCA also grants the CMA the power to hold parent companies liable for consumer law breaches committed by their subsidiaries.
3. Daily fines
If a business provides materially false or misleading information (eg selling a premium service which is said to contain certain benefits which are then only available at an additional cost) or fails to comply with an information request from the CMA, the CMA has the power to fine the business up to £30,000 or £150,000, or up to 1% or 5% of global annual turnover (whichever is higher).
The £150,000 maximum fixed penalty or 5% global annual turnover cap (whichever is greater) applies to more serious breaches involving undertakings made to the CMA, CMA enforcement directions or orders.
The CMA can also impose daily fines of up to 5% of global daily turnover for continued non-compliance.
4. Penalties for individuals, including criminal prosecutions
The CMA can hold executives and other individuals personally liable for consumer law infringements by their company.
Directors and senior executives may face personal fines of up to £300,000 or even criminal prosecution, including custodial sentences for serious breaches (where they have provided false or misleading information during a CMA investigation).
5. Compensation for consumers
The CMA can impose fines on businesses and require them to compensate individual consumers (via redress orders).
Consumers affected by anti-competitive or misleading practices can also file claims against non-compliant businesses. Legal battles can drain financial resources and damage investor confidence.
6. Directors’ disqualification orders
Directors of companies face disqualification orders where they have been convicted of an indictable offence under the DMCCA.
7. Reputational damage
Non-compliance can also lead to reputational damage to businesses and loss of trust and confidence by consumers.
How can businesses prepare for the DMCCA?
Businesses can prepare for the changes introduced by the DMCCA by reviewing their current processes from a legal and compliance perspective.
You may also need to consider providing additional training on the DMCCA within your organisation.
If any part of the DMCCA or the CMA guidance is unclear, you should raise this with the CMA and any industry groups.
For more information, please contact David Wozniak at [email protected] or call 0191 211 7831.
