New reforms to improve consumer protection

Contained in the Modernising Consumer Markets Green Paper, the Department for Business, Energy & Industrial Strategy has announced that regulators need to act on three principles when dealing with modern consumer markets:

• Ensure that competition is central and consumers are active in the marketplace.
• Make sure that new technology works for consumers rather than against them.
• Have appropriate and effective redress in place for when things go wrong.

Business Secretary Greg Clarke, who unveiled the reforms, said: "Britain has long been a world leader in ensuring that markets work in the interests of consumers...I am determined that we should renew that innovative, pro-consumer approach as new technologies present new challenges and opportunities."

A consultation on the proposals is currently under way and will close on 4th July 2018.

In addition to the proposals, the announcement also included the news that a new Chair of the Competition and Markets Authority (CMA) has been nominated, with former Treasury Select Committee Chair Andrew Tyrie taking on the role.

Competition vital

In November of last year the Government launched its ambitious Industrial Strategy, which is a long-term plan to increase the UK's earning power and productivity, with the aim of making the UK the most innovative nation in the world by 2030.

Referring to the Industrial Strategy, the Green Paper points out: "Achieving this ambition requires a UK business environment that is powered by new technologies, shaped by competition and contestability, where the best businesses of all sizes can thrive."

This competition benefits consumers because "firms only thrive if they provide what consumers want better and more cost-effectively than their competitors, through greater choice, lower prices, and better quality goods and services."

It provides examples, such as the airline and grocery industries, in which fierce competition has driven down prices for consumers.

As the UK approaches its exit from the EU, the Government is keen to maintain regulatory standards and make sure that competition is strong across the whole economy.

With its new Chair at the helm, the role of the CMA will be to monitor competition and tackle any areas where it's lacking or inadequate. In last year's budget the CMA was awarded an extra £2.8 million a year to help it take on more cases and improve outcomes for consumers.

Commenting on the proposals, new Chair Andrew Tyrie said: "In the years ahead, competition can and should be put even closer to the centre of British economic life, reaching to every sector, rooting out monopoly and unfair trading practices, and enhancing Britain's global competitiveness into the bargain."

Making technology work for consumers

Competition and innovation in UK markets has sharpened in the digital era as consumers look to the global online market of goods, with £1.2 billion spent online every week in 2017.

Taking into account the scale of consumer interaction with the digital economy, the Government has had to update its data protection measures, with the Data Protection Bill 2017-19 currently making its way through Parliament and the Digital Charter introduced to "agree the norms and rules for the online world and put them into practice."

One concern is data collection, and the Green Paper highlights that online firms can collect and analyse a lot more consumer data than offline companies, such as search histories and social media information, and then use this data to personalise their offerings to each consumer.

Examples include guiding consumers to well matched search engine results, showing different product prices to different consumers based on their purchasing history, and incentivising customers to return to websites they have previously visited (through the use of coupons and vouchers for example).

Although these methods can sometimes benefit consumers, such as offering discounts, the Government is concerned that too often data collection is not in their best interests.

As such, a concept called 'data portability'has been introduced in forthcoming data protection legislation.

This allows consumers to request access to their personal data and then use this information across any number of different services and suppliers. The data would be given to the consumer, or a third party of their choice, in a commonly used machine-readable format - thereby making it portable.

It's hoped that data portability will allow online consumers to better take advantage of emerging technologies; for example, by better understanding their spending habits, finding better deals based on personalised information and making switching between services easier.

Help when things go wrong

The final principle that regulators need to act upon is to ensure that consumers are well served when things go wrong, by strengthening the enforcement of consumer rights and making sure complaints are dealt with properly, with a particular emphasis on helping vulnerable individuals.

The Green Paper states that although the current regulatory framework works well for most consumers, it's concerning that tens of thousands of consumers who make a complaint about a service end up having to go to court to resolve their dispute - with 47% of these people only having to go to such lengths because the business they were in dispute with refused to participate in a cheaper and easier resolution solution.

It's hoped that regulators could improve awareness of the role of alternative dispute resolution (ADR), which is when a business pays an independent body to resolve the dispute.

This solution is generally very effective, with Government research showing that eight out of 10 people who have used ADR say that their problem would not have been solved without its help.

Making sure that vulnerable individuals are protected, particularly when things go wrong, is another important action for regulators. The Government is particularly keen for improvements in helping those with mental health issues and cognitive impairments, such as dementia, because these individuals have particular challenges when dealing with businesses and suppliers and are most at risk of receiving poor outcomes.

The regulators will now need to collaborate to identify and agree on a set of principles to improve services for these vulnerable consumers across the board - although some work has already begun on this, such as energy regulator Ofgem's safeguard tariff.