Natalia Samodina, Client Legal Director at law firm The Legal Director, talks about the crackdown on fake and misleading consumer reviews and why your business needs to be on alert.
Why has the Digital Markets, Competition and Consumers Act 2024 (the “Act”) been enacted? Several factors have contributed over time: the global pandemic, the subsequent hybrid working models, the overall shift from the “brick” shops to their “click” counterparts, the online marketplace being more mature than it was during the time the existing EU-derived legislation was passed and the rise of consumer reliance on peer reviews, which contributes to circa £23 billion of sales annually in the UK.
To address the above developments and the challenges that come with them, the Act has tightened the pre-existing EU-derived rules on prohibited unfair practices and introduced new bans relating to fake and misleading consumer reviews.
Coming into force from 6 April 2025, the Act will significantly impact the commercial practices of furniture manufacturers and traders, including marketplaces like Furniture Village, Wayfair and John Lewis. Not least, because the leading UK consumer regulator, CMA, will have direct enforcement powers, including the ability to impose huge fines, to ensure compliance.
This article outlines new offences related to consumer reviews, sanctions for non-compliance, and steps for businesses to take to be compliant.
WHAT IS BANNED?
Let’s be clear about what the terms mean. A consumer review is “fake” if it falsely claims to reflect a genuine consumer experience.
A review is “misleading” if it fails to disclose incentives given to the reviewer or is manipulated in a way it’s presented in order to mislead consumers about a product’s quality, value, or performance.
The Act not only bans the direct offences of submitting, commissioning, and publishing fake and misleading reviews (together “banned reviews”), but also offering related services to traders.
Crucially, it requires review publishers to take “reasonable and proportionate” steps to prevent and remove such reviews.
THE COST OF A FALLOUT
To enable quicker enforcement and ensure businesses adhere to the new rules, CMA can now swiftly enforce consumer law breaches without needing to take cases to court.
The CMA’s powers include issuing breach notifications, accepting undertakings, imposing penalties of up to 10% of the offender’s turnover or £300,000 (whichever is higher), and enforcing against directors.
The Act protects UK consumers, and foreign businesses are not exempt from its reach.
In the process of a recent CMA investigation into Google’s fake review measures, CMA’s CEO Sarah Cardell said: “Left unchecked, fake reviews damage people’s trust and leave businesses who do the right thing at a disadvantage”. To comply with CMA’s findings, Google agreed to sanction businesses and individuals involved in fake reviews, including by placing ‘warning’ alerts on the profiles of businesses that use fake reviews to boost their star ratings.
The Google case is a useful benchmark for the sanctions CMA is ready to place on future offenders, irrespective of their market capitalisation. Another case in point is Amazon, still under investigation for its handling of fake reviews.
WHAT SHOULD BUSINESSES DO?
The CMA’s draft guidance states that there is no “one size fits all” approach for publishers to comply with new rules. Nevertheless, it recommends several steps which, when implemented collectively, should be effective.
STEP 1 – CONSUMER REVIEWS POLICY
Each business should adopt and publish a policy which must:
- contain a clear prohibition of fake reviews;
- state clearly the approach towards incentivised reviews;
- be accessible to users intuitively using clear and prominent signposting;
- make it clear to consumers how to leave a review;
- explain the difference between leaving a review and making a complaint.
STEP 2 – REGULAR ASSESSMENTS
Businesses can begin by regularly assessing the risks of their consumers encountering banned reviews by using available information, such as:
- content or activity on their media, including technology to identify banned reviews;
- third-party reports of suspicious reviews; and
- findings from investigations or internal evaluations.
Preventive measures could include:
- criteria for publishing or removing reviews; and
- functioning of ratings and ranking systems.
STEP 3 – DETECTION
To identify banned reviews, CMA suggests:
- clear rules on who can submit reviews, such as requiring identification or account and purchase verification;
- using automated software to detect banned reviews, like those appearing to come from different consumers but coming from the same IP address; and
- providing an easy mechanism for consumers and third parties to report suspected banned reviews.
STEP 4 – INVESTIGATIONS AND RESPONSE
Investigations of suspected banned reviews should be thorough and timely, with clear communication on temporary measures, e.g. withholding or marking suspicious reviews as “pending”.
Responses could include removing banned reviews, correcting review counts, and imposing sanctions such as suspending or banning user accounts, issuing warning alerts, and terminating memberships on recommendation platforms like TrustPilot.
WHAT MEASURES ARE “REASONABLE AND PROPORTIONATE”?
The CMA states that the nature of consumer risks will determine what is reasonable and proportionate. Factors include the publisher’s business model: small traders with direct proof of purchase can easily verify reviews, while search platforms publishing third-party reviews need more extensive measures to comply.
SIZE MATTERS… BUT…
Online marketplaces, due to their high transaction volumes, may incentivise traders to procure banned reviews, necessitating more significant measures like automated tools to detect suspicious reviewer networks and anomalies.
NOT REALLY
The CMA warned that lack of resources is not a defence. Publishers should not publish customer reviews unless effective measures are in place.
IN DETAIL
The key consumer aspects of the Act are detailed in a recent webinar, which you can access here. A link to CMA’s guidance can be found here.
ANY QUESTIONS?
Natalia is a Client Legal Director for The Legal Director, a regulated law firm founded in 2011 to help SMEs with fractional General Counsel services. The firm operates remotely, has a flat structure where each lawyer is a corporate and commercial generalist at a General Counsel level, capable of handling up to 95% of client work independently. If you would like help complying with the Act, please give Natalia a call on 07747131233 or drop her an email at natalia.samodina@thelegaldirector.co.uk.
