Flash sale rules face scrutiny

New legislation targeting fair use in the competition market could lead to heightened investigations of everyday retailers. According to experts from the UK law firm Knights, the forthcoming Digital Markets, Competition and Consumers Act 2024, which recently received Royal Assent, is expected to come into effect this autumn and significantly impact the retail sector.

The act introduces several new regulations aimed at improving consumer protection and transparency. It will primarily scrutinize subscription services—ranging from delivery and meal services to gym memberships—that often profit from unused or overlooked services. A key focus will be on ‘free-of-charge trial’ periods and attractively discounted offers used to attract new customers.

Under the new rules, traders must provide comprehensive information to consumers before entering into contracts and throughout the contract’s lifecycle, including at the end of trial periods. This move is designed to enhance transparency and protect consumers from misleading practices.

Ellen Huison, an associate at Knights, emphasises that the new rules will empower the Competition and Markets Authority (CMA) to conduct more rigorous investigations and impose substantial fines, up to 10% of a company's global turnover, as well as potentially disqualify directors. Retailers are advised to prepare for these changes, especially with the act likely to come into force before the busy Black Friday sales.

The new bill will also introduce a statutory ‘cooling off’ period for subscription contracts, allowing consumers to cancel within 14 days of both the initial contract and any renewal. This measure addresses concerns highlighted by Citizens Advice, which reported that consumers wasted £688 million on unused subscriptions last year.

In addition, the act targets misleading practices such as fake reviews, which many businesses use to enhance credibility. Under the DMCC Act, fake reviews are deemed unfair commercial practices and could result in significant penalties for both individuals and businesses.

The legislation also addresses price reduction transparency, targeting deceptive advertising practices that mislead consumers. For instance, ads that feature heavily reduced prices but only on limited color options could face scrutiny.

Ellen Huison advises businesses to review their marketing strategies, including flash sales and pricing structures, to ensure compliance with the new legislation. Failure to adapt could result in legal challenges and regulatory action, making it crucial for retailers to seek professional guidance and adjust their practices ahead of the DMCC Act’s implementation.