UK: PM gives CMA new powers to fine firms that exploit consumer loyalty

According to the Financial Times, the Competition and Markets Authority (CMA) will be given “judge and jury” powers to impose fines on companies that overcharge or mislead customers, Prime Minister Theresa May announced on Tuesday, June 18.

The government confirmed it will consult on giving the CMA new powers to decide itself whether consumer law has been broken, without having to go through the courts as is currently the case. New powers would enable the CMA to intervene earlier and more quickly to tackle these failings and would include being able to directly impose fines on firms for poor business behavior.

This will act as a powerful deterrent to firms that are harming consumers with misleading claims, unfair terms and conditions and hard-to-exit contracts – practices that are central to many “subscription traps.” These measures aim to ensure subscriptions are as easy to exit as they are to enter. It will also help the CMA tackle bad practices in other consumer markets like secondary ticketing and unfair terms for care home residents.

May’s move comes after a so-called super complaint by Citizens Advice which alleged that banks, insurers, and telecoms companies were exploiting customer loyalty.

The charity network complained last year that consumers were collectively being ripped off by more than £4 billion (US$5 billion) a year for staying loyal to their providers in five areas: broadband, mobile, home insurance, mortgages, and savings.

Loyal customers were each paying a penalty of almost £900 (US$1,129.49) a year that is avoided by consumers who switch between providers to secure discounts, claimed Citizens Advice. Mrs May said many big companies had been “getting away with harmful trading practices” for far too long. “It is high time this came to an end and . . . we are confirming our intention to give much stronger powers to the CMA, to strengthen the sanctions available and to give customers the protection they deserve against firms who want to rip them off,” she added.