“Online Enforcement Orders” – New powers of enforcement for the CMA
Last month the Competition and Markets Authority (“CMA”) was granted new enforcement powers in the form of online interface orders, under the Consumer Protection Enforcement (Amendment) Regulations 2020 (“Regulations”). The Regulations are in response to the Consumer Protection Co-Operation Regulation (“CPC Regulation”), which has applied since 17 January 2020. The CPC Regulation aims to improve EU-wide co-operation mechanisms for consumer protection and to enhance enforcement capability in digital markets.
What is an online interface order?
An online interface is defined in the Regulations as ‘any software, including a website, part of a website or an application, that is operated by or on behalf of a trader, and which serves to give consumers access to the trader’s goods and services.’ The broad definition means that an online interface order can be sought against any interface from a sole trader’s website to a social media platform.
The CMA may seek an online interface order if it thinks that there has been or is likely to be a Community infringement (i.e. an infringement of EU consumer law). The online interface order may be sought against the person that the CMA thinks has engaged, is engaging or is likely to engage in conduct which constitutes the community infringement or against another person. The wide-reaching powers allow the CMA to take action against ‘likely’ offences and to pursue the alleged offender or ‘another person’ i.e. a third party, which could include online intermediaries such as platforms, app stores or domain name registrars.
A court may make on online interface order if it finds that:
- there has been or is likely to be a Community infringement;
- there are no other available means of bringing about the cessation or prohibition of the infringement which, by themselves, would be wholly effective; and
- it is necessary to make the order to avoid the risk of serious harm to the collective interests of consumers.
If granted, the online interface order may direct 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 the CMA.
An online interface order can also be sought on an interim basis, including without notice.
How will the new powers impact businesses and consumers?
An online interface order may require any website, platform or app to remove or amend content, restrict access, or even delete a domain name.
Although the new powers are wide-reaching, the CMA still needs to go to court to obtain the online interface order and the court will only grant an online interface order if there are no other “wholly effective” means of remedying the infringement. In practice this is likely to mean that the CMA will need to engage in dialogue with businesses before going to court to seek the online interface order.
The CMA may publish any online interface orders, alongside the identity of the person engaged in the relevant conduct, which could lead to reputational harm for businesses.
The new enforcement powers have only been available to the CMA since the 2 June 2020, so we have not seen examples of how the CMA have used them yet. Online businesses should monitor the CMA’s use of its new powers and in turn the courts approach to such applications.
Consumers are not given any direct remedies under the Regulations, so the impact for consumers will depend heavily on how the CMA decides to use its new powers and the courts attitude to granting the orders.
The Regulations are in line with the CMA’s focus on consumer protection and online practices. Already this year the CMA has established the Covid-19 Taskforce to deal with infringement of consumer laws arising from the pandemic and also launched an investigation into misleading online reviews (which we previously blogged about here and here). Consumers should start to see the CMA using its new powers as a formal means to demand removal of infringing content or misleading reviews from interfaces, in which case consumers should expect to see greater protection in respect of online transactions.
Other changes introduced by the Regulations
The Regulations also:
- widen the scope for redress measures for consumers where there has been a breach of certain consumer protection laws. As a result redress measures in relation to Community infringements will be available for the benefit not just of consumers who have suffered a loss but also consumers who have been affected in any other way;
- amend Schedule 5 of the Consumer Rights Act 2015 to ensure that, in respect of Community infringements, the power to purchase a product may be exercised to obtain that product for use as evidence in proceedings under Part 8 of the Enterprise Act 2002;
- add to the list of national competent authorities able to exercise the investigation and enforcement powers in Part 8 of the Enterprise Act 2002 and Schedule 5 to the Consumer Rights Act 2015.
As set out above the CMA must, amongst other things, show that there has been or is likely to be a “Community infringement”. This is currently an infringement of EU consumer protection law, but from the end of the transition period references to Community infringements will be replaced by references to UK domestic law derived from EU legislation. Therefore, the online interface order may be an enforcement tool in the UK for many years to come.
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