Navigating the new CMA consumer enforcement regime – an economic approach

Following changes brought about by the Digital Markets, Competition and Consumers Act 2024 (“DMCC Act”), the Competition and Markets Authority (“CMA”) can now decide whether consumer protection laws have been infringed without having to take a business to court. The CMA can also impose fines of up to 10% of a firm’s global turnover, and require redress for affected consumers without recourse to the courts.

The law stipulates that certain commercial practices undertaken by “traders” are always deemed “unfair” (i.e., unlawful), including fake reviews and drip pricing. However, to deem other practices unfair (such as “misleading actions and omissions”, “aggressive practices”, and “conduct that contravenes the requirements of professional diligence”), such practices must be likely to cause the “average consumer” to take a “transactional decision” that they would not have otherwise taken.

While these terms are legal in nature (and apply both in the UK and the EU), establishing whether an impugned practice would be likely to materially distort consumer purchasing decisions is fundamentally a question of economic effect. As such, economic evidence is likely to form an important part of the answer in terms of compliance, defence against interventions, establishing the amount of redress or other remedial action, and financial penalties.

This article explains what factors may shift the dial when assessing these important issues. We explain that, while behavioural economics can be informative as regards what drives consumer decision making, its predictions are frequently ambiguous. Therefore, hard evidence on how a representative sample of consumers would behave in the specific contexts (and counterfactuals) under investigation will likely be key to the assessment. Drawing on these insights, we set out indicative steps, and evidence gathering techniques, that may be useful when firms self-assess their approach to information disclosure, or are subject to investigations into their B2C sales practices, whether under consumer or competition law.