Competition law reforms reshape contract landscape

A letter, written by Jennifer Halliday, Senior Director of Advocacy, Public Policy, and International, emphasises the role of the Digital Markets, Competition and Consumers (DMCC) Act 2024 in reshaping consumer protection and contract law enforcement across the UK, including Scotland.

“The DMCC Act, which received Royal Assent on 24 May 2024, grants new direct enforcement powers to the CMA in relation to consumer protection law,” Jennifer Halliday explains. These powers enable the CMA to directly investigate breaches, determine if consumer protection laws have been violated, and impose penalties without the need to go through a court-based enforcement model, which previously had been the standard. This represents a significant shift in how consumer law—and by extension, contract law—can be enforced.

Key impacts of the DMCC Act on contract law

Jennifer Halliday highlights several provisions of the DMCC Act that could influence how contract law is enforced in Scotland, particularly through new enforcement mechanisms.

1. Direct Enforcement Powers: The Act allows the CMA to directly take action against businesses for breaches of certain consumer protection laws. “The CMA alone [can now] make decisions on whether some specific consumer protection laws have been broken, as well as impose penalties,” she writes, noting that this includes contract-related provisions under the Consumer Rights Act 2015.

2. Court-Imposed Financial Penalties: One major shift involves changes to how penalties are imposed. Previously, enforcement relied on a court-based model, but the new law allows the CMA and other bodies like Trading Standards Scotland to ask courts to impose financial penalties for serious breaches of consumer law and failure to comply with information requests. Jennifer Halliday points out that this could have “an indirect impact on the enforcement of contract law in Scotland.”

3. Appeals Process: Decisions made by the CMA under this direct enforcement regime are subject to appeal in Scotland’s Outer Court of Session, giving businesses and individuals a formal pathway to challenge the authority’s decisions.

4. Unfair Contract Terms Directive: While some aspects of EU law, like the Unfair Contract Terms Directive (UCPD), have been retained post-Brexit, Jennifer Halliday mentions that the UK’s departure from the EU has altered how European Court of Justice rulings are treated by UK courts. “There is an uncompleted exercise on the retained case law still due to be carried out by [the Department for Business and Trade],” she notes, leaving room for further adjustments in how unfair contract terms are interpreted in the future.

Upcoming guidance and future developments

The CMA is also working on new guidance for the Consumer Protection from Unfair Trading Regulations (CPRs) 2008 as part of its expanded role under the DMCC Act. This guidance, expected to be published in early 2025, will clarify the enforcement landscape. Jennifer Halliday writes, “We have recently completed a consultation on the draft direct consumer enforcement regime guidance, and we hope to publish updated guidance in early 2025, subject to approval by the Secretary of State.”

The letter signals the CMA's readiness to support the Scottish Government in adapting to these changes, stating, “If it would be helpful to discuss the changes our new powers will make to the wider landscape, we would be happy to meet with you.”

Implications for Scottish contract law

The CMA’s response illustrates the growing complexity of enforcing contract law in a post-Brexit UK, with direct enforcement powers and consumer protections reshaping legal landscapes. The DMCC Act’s provisions, while primarily focused on consumer protection, have broader implications, particularly where contract law intersects with consumer rights. Jennifer Halliday’s letter provides a roadmap for how these changes might evolve, offering insights into the impact of competition law reforms on Scotland’s contract law framework.

The Scottish Law Commission’s review of contract law, initiated in 2018, now takes on new significance, as these regulatory changes must be factored into the future of contract law enforcement in Scotland.