A new era of consumer protection is nearly upon us, with the Digital Markets, Competition and Consumer Act 2024 (DMCC) due to come into force (albeit a bit later than expected – the government recently announced it will be April next year). The enforcement of consumer protection laws is being completely overhauled. Direct enforcement powers will be handed to the Competition and Markets Authority (CMA) to investigate and sanction businesses that breach consumer protection laws, rather than the CMA and others having to rely on seeking recourse through the courts. The CMA's powers (and risks for businesses) will be the same as those already used by it to investigate competition law infringements – a sobering thought for any business engaged in selling goods, services and digital content to end consumers. All indications are that the CMA is ready and keen to use these new powers. Good news for consumers, but are businesses here prepared?

Current system of enforcement "not fit for purpose"

Consider the following scenario. It is the last evening of your holiday in the Western Isles and you realise you have forgotten to get your mother a gift. You remember seeing an advert for a new local artisan perfume that captures the essence of the Western Isles – "McReekie's Mist" – that is locally and sustainably-produced and is the perfect solution. You do not have time to find a shop locally that sells it, so order a bottle online from a company – "Aff the Shelf" – that specialises in Scottish artisan designer gifts, at a very reasonable price.

Six weeks later, despite numerous assurances by email and webchat with unidentified personnel at Aff the Shelf, you still have not received the gift. Spurred on to further research, you discover that Aff the Shelf, a company widely complained about, is registered in a small Pacific island state, and that McReekie's Mist is manufactured in South America by a corporation with a dubious human rights record using some potentially carcinogenic compounds that most definitely are not sustainably or locally produced.

An unlikely scenario perhaps, but for this one you could substitute many others, given the multitude of ways in which your consumer rights can be breached. Confronted by a situation like this, you might be motivated to complain about Aff the Shelf's conduct to Trading Standards Scotland (TSS), one of the enforcers of consumer protection laws in Scotland (alongside the CMA). Currently, TSS would need to go to the Scottish courts to secure an order against the company to stop the infringing conduct. This system means that enforcers pursue the most serious cases only, meaning bad behaviour may go unpunished.

New direct enforcement powers under the DMCC

Under the DMCC, Aff the Shelf could be investigated by the CMA, which could culminate in significant civil penalties, including fines of up to 10% of turnover or £300,000 (whichever is higher) and the business being prevented from trading online in the UK. There will be no need for the CMA to go to court.

Other sanctions available to the CMA will be an order that directs a person to remove content from, or modify content on, an online interface; disable or restrict access to an online interface; display a warning to consumers accessing an online interface; delete a fully qualified domain name; and take any steps necessary to facilitate the registration of that domain name by a body responsible for enforcing the DMCC. Undertakings can also be agreed with the CMA.

A CMA investigation under consumer powers will follow the same process as those under competition law. This means that there are also a range of procedural risks for parties subject to investigation, including:

• Where a business has given undertakings to the CMA, the CMA can impose a penalty of up to 5% of the business's global annual turnover or £150,000 (whichever is higher) for breach of the undertaking.
• The CMA can also issue fines of up to 1% of a business's global annual turnover or £30,000 (whichever is higher) for providing materially false or misleading information to the CMA in the course of an investigation, or failing to respond to an information notice.
• In each of these cases, the CMA can impose an additional daily penalty for continued non-compliance.
• As well as the fines that may be levied on companies, the CMA has the power to fine individuals up to £30,000.

So what?

Laws require sanctions and the enforcement of sanctions to be effective. Will companies like the fictitious Aff the Shelf take notice and change their behaviour?

The CMA will not take on every case and will need to prioritise cases with the highest impact, but the more significant risks should make companies think twice before engaging in conduct which breaches consumer protection laws.

The enforcement powers cast a wide net. The DMCC is concerned with commercial practices which harm the collective interest of consumers, are connected with the UK and infringe consumer protection law.

"Commercial practices" and "connected with the UK" are widely defined to include, respectively:

• any act or omission by a trader relating to the promotion or supply of the trader's goods, services or digital content to a consumer or another trader's goods, services or digital content to a consumer; and
• carrying on activities that are, by any means, directed to consumers in the UK is enough (including online retailers like Aff the Shelf).

All existing consumer protection rules are within the scope of the direct enforcement powers (a long and varied list of primary and secondary legislation). The DMCC also updates the law on prohibited unfair commercial practices, including a new banned practice relating to fake consumer reviews and a prohibition of the "drip pricing" of unavoidable fees. There are new protections for consumers in relation to subscription and saving scheme contracts.

As well as the CMA, the DMCC lists the very numerous other entities which have powers to put the DMCC into effect – aptly named as enforcers. Enforcers include government ministers; every local weights and measures authority in Great Britain; regulators ranging from the Information Commissioner and the Consumers Association to the Financial Conduct Authority; and the Gas and Electricity Markets Authority and the Maritime and Coastguard Agency, although all bodies other than the CMA will still need to apply to the court to utilise their powers.

It is also possible that CMA enforcement activity will encourage litigation by consumers on consumer law issues, although the government rejected calls to include breaches of consumer legislation within the scope of the regime for opt-out collective proceedings which applies in respect of competition law infringements.

What next?

Risk management is critical to any successful business. Businesses dealing directly or indirectly with consumers must understand the consumer protection legislation that affects their business and the supply chains of which they are part. Compliance training will be appropriate for those businesses with a more than negligible risk of infringing consumer protection law and engaging the DMCC. In particular, businesses should review the consumer journey and be prepared to demonstrate that it is fair and compliant. The CMA is working on draft guidance to assist traders in understanding their obligations, which will help with compliance, as will the CMA's decision-making practice once that starts to emerge. Early appreciation of commercial practices that may lead to sanctions will enable remedial activity and, at worse, the provision of undertakings to adopt appropriate commercial practices in future … and fewer spoilt holidays.