CMA issues draft compliance advice for trader recommendation platforms

The CMA is consulting on draft consumer law compliance advice for trader recommendation platforms (TRPs), to help them better understand their obligations under consumer protection law. TRPs, such as websites and apps that help consumers find traders for home improvement, maintenance, or repair work, are under scrutiny for potentially misleading customers about the quality and reliability of suggested traders.

The CMA, working together with four trading standards bodies in the UK, has identified several areas of concern through previous analysis. In addition to misleading claims, the authorities found various fake reviews, a lack of effective vetting or verification processes, as well as many platforms lacking an accessible or effective complaints process, making it difficult for consumers to resolve issues with traders.

The draft compliance guidance outlines six overarching principles that TRPs should follow to address the consumer protection concerns identified and to help ensure compliance with legal requirements. These are:

• ensuring that claims about services and the traders on the TRP are clear and accurate, and do not mislead consumers

• conducting appropriate checks before traders are allowed to advertise on the TRP
• having accessible, transparent, and effective complaints processes

• effectively monitoring the performance of traders on the TRP
• acting effectively on issues highlighted by complaints or monitoring activities, including imposing sanctions
• having an effective, transparent, and impartial process concerning online consumer reviews

The CMA said that it has seen “worrying evidence suggesting people could be misled into thinking these sites [TRPs] actually check traders – and will take action when things go wrong – which isn’t the case” therefore the CMA’s compliance advice is intended “to make sure trader recommendation sites know what their obligations are under consumer law and what they need to do to protect people using their sites”.

The draft compliance advice applies to practices on any marketing channel including websites, social media, online adverts (such as sponsored ads), posters, and sales brochures.

Tadeusz Gielas, competition and consumer law expert at Pinsent Masons, said: “The draft guidance builds on the CMA’s ongoing work around greenwashing, online choice architecture, and online pressure selling tactics. The principle-based approach in its current consultation aligns with how the CMA has developed guidance in other areas, such as its Green Claims Code which aims to address and prevent greenwashing. It is also another example of the CMA working closely with trading standards bodies to protect UK consumers, reflecting similar joint efforts involving price marking in the grocery sector.”

This is the CMA’s first consumer protection draft guidance and consultation since the Digital Markets, Competition and Consumers Act (DMCC Act) was passed.  The DMCC Act strengthens the CMA’s consumer law enforcement powers and places UK consumer protection laws which are directly enforceable by the CMA on par with UK competition law. The DMCC Act also replaces the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) and introduces certain new substantive rules to more broadly bolster consumer protection including in various online trading scenarios. For instance, by banning fake consumer reviews and drip pricing, and by regulating subscription contracts.

Angelique Bret, competition and consumer law expert at Pinsent Masons, said: “The CMA’s draft compliance advice gives valuable insights into the CMA’s expectations for businesses to be consumer law compliant. This is especially pertinent as the DMCC Act substantially raises the risks associated with consumer law infringement for businesses and individuals alike.”

Once the DMCC Act comes into force, likely later in the year, businesses will face maximum fines up to 10% of their total annual turnover for substantive breaches of consumer protection law, while individuals may also face substantial fines in certain circumstances. Fines for businesses and certain individuals will also apply for procedural infractions, such as failing to cooperate with a CMA consumer law investigation.

“Businesses should therefore promptly review their current practices and implement robust consumer law compliance procedures and training to mitigate their risk exposure,” said Bret.

The CMA consultation is open until 16 August 2024, with the authority welcoming views from businesses, consumer groups, and other stakeholders. The CMA aims to publish the finalised compliance advice by autumn 2024.