UK Gov to crack down on misleading marketing online

Sarah Cardell, CEO of the UK Competition and Markets Authority (CMA), described this as a “flagship bill” with the potential to be a “watershed moment”, expanding the CMA’s consumer law enforcement powers and introducing a new regulatory regime for digital markets in the UK. It is expected to come into force in the fall of 2024.

The bill, which comes five years after the Report of the Digital Competition Expert Panel​ concluded that digital markets required a new approach, introduces an administrative enforcement model which allows the CMA (rather than the courts) to determine directly whether consumer laws have been breached and impose penalties of up to 10% of a company’s global turnover.

The Advertising Standards Authority (ASA) is currently in charge of investigating cases of malpractice when it comes to online marketing and communications and has called out a number of companies for misleading posts and unsubstantiated health claims. Most recently, it called out the CBD oils, edibles and beauty brand Supreme CBD​ after its founder and ambassadors promoted products on social media without making any indication of their commercial relationship to the brand.

However the ASA’s authority only permits it to hand out warnings and request companies cease non-compliant practices, with no powers to enforce change or issue penalties.

Mark Tallon, chief executive officer at Legal Products Group Ltd, said this new bill will have a significant impact for the functional food and supplements industry, especially with regards to misleading green claims​, fake reviews, subscription services and influencer promotions.

“The biggest issue is the overt legal requirements to make clear when ambassadors/influences are promoting a product they must make clear this is an advert,” he said. “There will also be a responsibility on food companies to ensure reviews they host are genuine. The fact now the CMA can take direct action means much faster redress for consumers and in effect the ASA can pass on issues to the CMA for enforcement.”

The bill aims to reduce the risk of firms monopolising digital markets and raising prices. In a parliamentary debate of the bill in December 2023, Lord Bassam of Brighton noted:​ “The sector and market are, as we know, dominated by a small number of large companies, and the truth is that the lack of competition and regulation is acting as a barrier to market entry and expansion. This in turn impacts on consumers, their interests and the health of the market and our digital economy.

“…For that reason, we need to recognise the harm that can come from the creation of monopolies in a digital economy and ensure that innovation is fostered. This will enable us all to share in the benefits of new and emerging technologies and use them to grow the economy and promote economic and social progress.”

British multinational law firm Freshfields Bruckhaus Deringer said these are the most significant reforms to UK competition and consumer laws since the CMA was established in 2014.

In its overview of the bill, the firm stated: “Businesses should not only be thinking about their compliance with competition and consumer laws, but also, for example, about whether competition is working well in the industry, whether their business activities are relevant to the Government’s economic priorities, whether there are any potential, systemic consumer complaints that might prompt a CMA market inquiry, and whether business practices and models are resilient to regulatory change.”