The Digital Markets, Competition & Consumer Act is expected to come into force this autumn and will herald a transformative shift in the UK’s digital landscape, with far-reaching implications for businesses across all sectors
Michelle Beaumont and Andrew Evans of law firm Irwin Mitchell look at the potential impact on housebuilders and developers.
At first glance, it may appear that housebuilders and residential developers will fall outside the remit of the act, which covers goods, services and digital content. This might be thought of as including the fixtures and fittings options within a property but not the sale of land or buildings.
However, in Section 215 it states that “the supply of goods includes, in relation to buildings and other structures, construction of them by one person for another”, making it wide enough to relate to a new build property but not the land on which it is built.
Section 220 deals with this by stating that “goods include immoveable property”, which could be used to cover both land and buildings.
Key provisions of the act
Digital market regulation: Aimed at preventing anti-competitive practices.
Consumer protection enhancements: To protect against unfair trading practices, particularly in online transactions.
Competition law overhaul: Amending existing competition laws to enhance the Competition & Markets Authority’s (CMA) powers of enforcement.
The new legislation will provide greater protection for consumers, including stamping out some specific sales and marketing tactics such as fake reviews and imposing new rules around subscription contracts. Practices such as pressure selling and misleading timelines will continue to be unfair business practices.
However, even housebuilders that steer clear of these sorts of unscrupulous practices should familiarise themselves with some of the less headline-grabbing details, not least because of the significant financial and reputational penalties that could result from not adhering to the new standards.
Non-compliance with the act may result in a fixed fine of up to 5% of annual global turnover and a daily rate of up to 5% of daily global turnover for continued failure to comply with the CMA directions.
Also, depending on the enforcement route, the Digital Markets Unit (DMU) within the CMA can fine businesses up to 10% of their annual global turnover for non-compliance, and senior managers can be held personally responsible for ensuring their company complies with the DMU’s requests.
Check on consumer reviews
One area that housebuilders should look out for in the act is around consumer reviews.
Publishing consumer reviews, or consumer review information, in a misleading way will be an unfair business practice. There is also an obligation to carry out reasonable and proportionate checks on any reviews to make sure that they are not fake or false or misleading. This will include reviews published on websites and in marketing material, and not complying will be an unfair business practice.
Significantly, this could mean that only publishing good reviews could be classed as an unfair practice, and there may be a need to publish a representative sample of reviews.
It will also mean taking care with any selective quoting from consumer reviews.
Housebuilders are likely to have to train marketing staff to mitigate the associated risks and improve their recordkeeping so that if challenged, they can demonstrate compliance with the act.
There are also requirements to make sure it is clear if any reviews have been incentivised; for example, by being obtained as part of a requirement to enter a competition.
Housebuilders will, therefore, need to take care to track which reviews had an incentive element to them.
For developers who retain site management of their schemes, we anticipate the transparency of private estate management and estate management charges may come under more scrutiny, especially if there are large cost increases over time.
Preparing for the changes
We suggest the following preparation for the changes:
Audit your digital presence: Review online marketing and sales channels for compliance with the new digital market requirements.
Update consumer policies: Review and, if necessary, revise consumer engagement policies to align with the enhanced consumer protection measures.
Legal consultation: Engage with legal experts to understand the nuances of the act and its impact on operations.
Training and awareness: Train staff on the new regulations to ensure company-wide compliance.
Strategic planning: Consider how the changes in law might affect business strategy and plan accordingly.
It is important businesses prepare for the Digital Markets, Competition & Consumer Act, ensuring that they not only comply with the new regulations but also to ensure they thrive in a fairer digital marketplace.
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