Continued rise of UK consumer law: Fake online reviews and COVID-19 pricing and cancelations

On 22 May 2020, the CMA launched a consumer enforcement investigation into several major websites that display online reviews, to see if they are taking sufficient action to protect shoppers from fake and misleading reviews. The CMA also announced that it had secured commitments from Instagram to tackle the trading of fake and misleading reviews on its platform.  The CMA is separately continuing a wide-ranging programme work looking at consumer protection issues arising from the COVID-19 pandemic, focussing in particular on cancellations and refunds and pricing practices.

Fake and misleading online reviews

The CMA's online review investigation will look into how the websites under consideration currently detect, investigate, and respond to fake and misleading reviews. In particular, the CMA will consider issues such as:

• suspicious reviews, e.g. where a single user has reviewed an unlikely range of products or services;
• whether businesses are manipulating the presentation of reviews about their products and services (e.g. by combining positive reviews for one product with the reviews for another); and
• how these websites handle reviews about products or services that the reviewer has received a payment or other incentive to review.

Such false and misleading statements are prohibited under consumer legislation, in particular, the Consumer Protection from Unfair Trading Regulation Regulations 2008. This forms part of the CMA's wider programme of work into this area; in 2015, the CMA estimated that online reviews influence GBP 23 billion of UK customer spending each year.

The launch of this investigation ties into the CMA's announcement, also on 22 May 2020, that it has secured commitments from Instagram to tackle the risk that people can buy and sell fake and misleading reviews through its platform (which is operated by Facebook). In particular, Instagram has:

• committed to updating and revising its policy guidelines to clarify that it prohibits fake and misleading review content across its website;
• taken down the content that the CMA had identified, and removed similar content that it identified itself (in particular, Instagram has removed 76 profiles that were being used to trade, or facilitate the trade, of fake and misleading online reviews); and
• agreed to put in place robust systems to detect and remove this kind of harmful material from its website in the future.

This follows similar action taken by Facebook and eBay in January 2020 in response to the CMA's concerns regarding the trade of fake and misleading reviews on their websites, which were raised in June 2019 as part of the CMA's programme of work on this issue.

The CMA has acknowledged that concerns regarding online reviews are particularly relevant during lockdown, when consumers are more dependent than ever on online shopping. Although the CMA is not alleging that any of the websites have acted illegally at this stage, it has been clear that it will take enforcement action to secure any necessary changes, pursuing action through the courts if needed. 

CMA's increasing focus on consumer enforcement

This is further evidence of the CMA's increasing focus on consumer enforcement.  This has been evident, in particular, in its work in response to COVID-19, with the CMA's COVID-19 taskforce focusing in particular on issues relating to unjustifiable price increases and cancellations and refunds. 

Price increases

In respect of its concerns relating to price increases, the CMA sent an open letter to the pharmaceutical and food and drink industries raising concerns about firms seeking to capitalise on COVID-19 by charging unjustifiably high prices for essential goods or making misleading claims around their efficacy.  The CMA warned that it has recourse to a range of competition and consumer powers to tackle such behaviour.  Subsequently, on 18 June, the CMA launched investigations under Chapter II of the Competition Act 1998 into whether four pharmacies and convenience stores may have abused a dominant position by charging excessive and unfair prices for hand sanitiser products.  Although limited details are available, it seems likely that the CMA is investigating whether the four stores may have abused a dominant position in their local area.

Cancellations and refunds 

To address concerns relating to cancellations and refunds, the CMA has turned to its consumer law powers.  In April 2020, it published a general overview on the legal position pertaining to refunds, in which it reinforced that, subject to a number of limited exceptions, consumers can expect a full refund where:

• a business has cancelled a contract, without providing the goods or services or where no service has been provided (for example due to prevention of the service by Government public health measures) or
• the consumer cancels, or is prevented from receiving services, as a result of Government public health measures (meaning the consumer is not allowed to use the service).

The CMA also confirmed that whilst credits, vouchers, rebooking or rescheduling could be offered as alternatives to refunds, consumers should not be misled or pressured into accepting an alternative to a refund. 

The CMA announced at the end of April 2020 that, in response to a large number of complaints, it had opened an investigation into cancellations and refunds.  Initially, this investigation focused on three sectors: weddings and private events, holiday accommodation, and nurseries and childcare providers, and it has since been extended to package travel.  On 9 June 2020, the CMA announced that Vacation Rentals, an operator of online accommodation websites, has offered undertakings to provide full refunds to customers who were unable to fulfil bookings due to lockdown restrictions.  The CMA noted that inquiries continued into other companies, which might lead to court action is similar undertakings are not agreed.

For a summary of the UK consumer law regime, as well regimes in other jurisdictions around the word, see the International Comparative Legal Guide to Consumer Protection Laws and Regulations 2020.

With thanks to Danica Barley of Ashurst for her contribution.