Consumers must be better protected from fake reviews and subscription traps with new measures that give the competition watchdog greater powers to crack down directly on rogue marketers.
The measures include making it “clearly illegal” to pay someone to write or host a fake review and clearer rules to make it easier for consumers to opt out of subscriptions.
Prepayment schemes such as Christmas savings clubs will also need to fully protect customer money through insurance or trust accounts.
The legislation will provide protection for buyers’ savings clubs – where consumers can pay for goods and services in installments throughout the year – which are not currently covered by the Financial Services Compensation Scheme.
This means that even if the business goes bankrupt, shoppers’ money will still be protected and it is intended to prevent problems such as the collapse of the Christmas savings club Farepak in 2006, when thousands of customers could not afford the festive gifts.
Fake reviews will be addressed through consultation on a new law prohibiting asking someone to write or submit a fake review, host consumer reviews without taking reasonable steps to verify they are genuine and offer or advertise to submit, commission or facilitate false reviews.
“Underwriting traps” in which companies make it difficult to terminate a contract will also be stopped. Under new rules, companies must provide clearer information to consumers before they enter into a subscription contract, send a reminder that a free trial or low-cost introductory offer is about to expire and ensure that consumers can leave a contract in a “simple and economical” way. efficient and timely manner”.
The Competition and Markets Authority (CMA), instead of a court, will be able to award compensation to consumers and directly impose financial penalties of up to 10% of annual worldwide turnover for companies or up to to £300,000 in the case of an individual.
Consumer Affairs Minister Paul Scully said: “We are ensuring that consumer protection keeps pace with a modern, digitalised economy.
“You’re no longer going to visit a five-star restaurant just to find a burnt lasagna or get caught up in a subscription that has no end in sight. Consumers deserve better and the majority of businesses that do the right thing deserve protection from dishonest traders who undermine them.
The average UK household spends around £900 each year influenced by online reviews and spends £60 on unwanted subscriptions, figures show.
Citizens Advice policy director Matthew Upton said: “With pressure building on household budgets, it is good to see measures that will make it easier for people to protect their money.
“Measures to deal with underwriting pitfalls are particularly welcome. We hope this will help entice unscrupulous traders to book and prevent buyers from being duped by underhanded tactics.
CMA Chief Executive, Andrea Coscelli, said, “This is an important step towards strengthening CMA’s ability to hold businesses to account, promote fair and open markets and protect British consumers.
“The CMA stands ready to help the government ensure that the legislation can be introduced as quickly as possible, so that consumers and businesses can benefit.