In contrast to German competition law, which primarily relies on warnings from competitors or legally authorized associations in the event of competition violations in order to ensure consumer law standards, compliance with such standards is guaranteed in many EU states by national competition authorities. In the United Kingdom (UK) after Brexit, this role will be played by the Competition and Markets Authority (CMA). However, the CMA has so far had little authority to enforce British consumer law. This is set to change through a new law, a bill for which was introduced in the British House of Commons in April 2023.
Online-Handel in UK
Online trading has played a major role in the UK for many years. The trading volume doubled during the Corona lockdown and is now still above pre-pandemic levels. Overall, it accounts for over 30% of all retail sales in the UK. This makes effective consumer protection against unfair market behavior all the more important. According to UK government research, UK consumers suffer significant material damage every year as a result of online disputes over poor product quality, delivery difficulties or non-performance.
Poor enforcement of consumer protection
Since the British government has incorporated the EU consumer protection regulations into British law, British consumers are, on the whole, no worse off than consumers in EU countries when it comes to structuring their rights. However, there is a lack of enforcement of these rights.
Violations of competition law are repeatedly identified, particularly in connection with online subscription contracts (products or services) and fake reviews or product ratings. Reviews have a significant impact on consumer behavior.
The CMA estimates that £23 billion of UK consumer spending is influenced by online reviews every year. According to the British government, there is a lack of a competition authority that has independent powers to enforce better standards for the benefit of consumers.
Planned change in the law
On April 23, 2023, a draft law on the “Digital Market, Competition and Consumers Bill” was introduced in the British House of Commons. The law is scheduled to come into force in autumn 2024. It is intended to replace the previous law “Consumer Protection from Unfair Trading Regulations” (CPR). replace, with which EU consumer law was transferred to British law. The extensive draft law (6 parts and 26 annexes) is intended to introduce, among other things, competition-promoting rules for digital markets in addition to reforming consumer law.
The following is about the part of the draft law that deals with the reform of consumer law.
EU consumer law should be retained, but it should be adapted to the needs of the UK. The catalog of unfair business practices adopted by EU law should be supplemented in particular by unfair practices such as fake reviews or ratings.
The British Competition Authority (CMA) plays a key role in the draft law.
Strengthening the CMA’s competencies
The CMA is the main competition and consumer protection authority in the UK. However, according to the current legal situation, it is a kind of “toothless tiger” when it comes to enforcing consumer law. Although the CMA can determine that consumer rights have been breached, it can only advise consumers to enforce their rights in court. In contrast, for example, to the French competition authority, the CMA has no independent authority to punish violations of consumer rights through sanctions such as fines.
In the future, the CMA should have the ability to force online retailers to disclose relevant information about their business practices in the event of suspicion. If consumer law is ignored, it should be able to impose severe fines.
Impact on online retailers based in Germany
British law generally applies to online retailers who conclude contracts with consumers from the UK. You are therefore also subject to decisions by the CMA. The previously applicable EU regulations Rome I and Rome II on the applicability of legal provisions in cross-border trade have been incorporated into national law in the UK and continue to apply.
However, as things currently stand, it has yet to be finally clarified to what extent future fines imposed by the CMA can also be enforced against online retailers based in Germany.
The situation is unproblematic if the online retailer operates its business through a branch in the UK. The CMA can then contact that branch for enforcement purposes.
However, it is questionable what applies in the event that an online retailer sells goods or services directly from Germany to consumers in the UK.
Regulation (EU) No. 1215/2012 (hereinafter EuGVVO; also referred to as “Brussels I”), which regulates the jurisdiction of courts in the EU and the recognition and enforcement of civil or commercial law decisions, will apply in the UK after Brexit no longer.
The legal basis would be the Hague Convention on Choice of Court Agreements of June 30, 2005 (“HCC”), to which the UK is a party. However, this Convention has a very narrow scope. Consumer disputes are excluded.
The legal basis could be the Lugano Convention of 2007. The UK would like to join this agreement. However, this depends on the consent of the other contracting parties, which must be viewed as a failure.
The bilateral enforcement convention of 1960 could play a role in relations with Germany. It is not clear whether this agreement will be revived.
If no agreement with the UK applies, CMA decisions could be subject to German civil procedure law (§§ 328, 722 ZPO) can be enforced in Germany. It is currently unclear whether this route can be taken, whether reciprocity is granted and whether this route also applies to decisions by a British authority.
Conclusion
On April 23, 2023, a draft law on the “Digital Market, Competition and Consumers Bill” was introduced in the British House of Commons, which, among other things, is intended to expand the powers of the British competition authority CMA. The law is due to come into force in autumn 2024 and will strengthen consumer protection in the UK by giving the CMA more powers to enforce consumer protection rights. The law may have an impact on online retailers based in Germany if contracts are also concluded with consumers from the UK. It remains to be seen whether and, if so, with what content the law will actually be passed. We will monitor this and report again if necessary.
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