The Competition and Markets Authority lists unfair terms in consumer contracts as one of its priorities to address using its new enhanced enforcement powers, including its new power to levy hefty fines. It has already opened two investigations about unfair terms. Given this, the CMA's publication of its revised guidance on unfair contract terms has arguably never been a more important read for B2C businesses. The final guidance follows a consultation which opened in February, when we wrote about the draft guidance and what it meant for businesses. Now that the final version is here, we take a closer look at what changed because of the consultation and what it means for your business.
Background
The underlying law in the Consumer Rights Act 2015 has not changed: the Act treats certain terms as automatically unfair, exempts 'core' terms describing the main subject matter or price from review provided they are transparent and prominent, and otherwise assesses fairness against a general test judged from the perspective of the 'average consumer'. However, the enforcement landscape has shifted significantly, most notably through the Digital Markets, Competition and Consumers (DMCC) Act 2024, which gives the CMA direct powers to enforce and the ability to impose penalties of up to 10% of global turnover or £300,000, whichever is higher. This means that the stakes for non-compliance are much higher than previously.
In practice, the CMA is likely to treat this guidance as its enforcement yardstick, meaning businesses that fall short of it should expect their contract terms to attract regulatory scrutiny. We are waiting for the unfair terms cases which the CMA is currently pursuing using its new powers to progress to a conclusion. In the price transparency cases at the forefront of the CMA's activity, we have already seen fines of £4.2 million (reduced from £7m for cooperation) and an order of redress on top.
The key points and changes made
One of the CMA's objectives in revising its guidance was to make it clearer, more accessible and easier to navigate. In doing this, the CMA proposed to streamline the original 245-page guidance document to nearly half the length. Respondents to the consultation broadly supported the CMA's general objective. However, there was a call for more examples to be provided and a concern that the draft guidance could be read as expanding businesses' legal obligations beyond the Act and potentially lowering the bar of the average consumer test, which is relevant to assessments of fairness when terms are not automatically unfair or exempt.
Transparency as a standalone obligation
A significant clarification in the final guidance is that transparency is a standalone legal requirement. Respondents highlighted the importance of preserving the clear statement that transparency and fairness are separate requirements. The CMA has clarified that the "specific transparency requirement is a standalone legal obligation, though it sits alongside and reinforces the more general fairness requirement." This matters because a term can fail the transparency test even if it is not unfair, and enforcement action can be taken on that basis alone.
The 'average consumer' and behavioural economics
Respondents raised concerns that the draft guidance unduly emphasised behavioural economics and treated the 'average consumer' as inherently vulnerable and inattentive, thereby lowering the legal standard and imposing disproportionate burdens on businesses. Some called for more explicit acknowledgment that consumers should take some responsibility for the terms they agree to. However, the CMA's response is that the guidance strikes the right balance; it reflects the Act's assumption that traders generally hold more power than consumers, and that this can vary by contract, without suggesting traders are responsible for consumers' behaviour biases.
The core exemption
Respondents considered that the draft guidance adopted a narrower interpretation of the core exemption than the previous guidance, limiting it to "essential exchange terms" and potentially rendering legitimate pricing structures unlawful. They asked for clearer safe harbours for transparent administrative fees and standard charges. The CMA said that its interpretation was consistent with pre-Brexit case law on the core exemption but did clarify that whether a term counts as the main subject matter should be assessed on a case-by-case basis, having regard to "the nature, general scheme and the stipulations of the contractual framework" and its factual context.
Digital transparency techniques
Respondents asked for more practical guidance on achieving transparency in digital environments, including through layered interfaces, expandable sections and mobile-first design. The CMA said examples could quickly become outdated but added further non-exhaustive techniques such as providing contracts in multiple formats, ensuring accessibility across devices, making terms readily available via a single click, providing information in smaller pieces throughout the consumer journey (such as pop-ups or hover-over text), and using FAQ formats.
A more practical emphasis
The CMA has split content into separate subsections on what the law requires and how traders are more likely to achieve compliance in practice. The CMA has also promoted several practical points from footnotes into the main body of the text, so that actionable guidance is no longer buried in citations.
Updated examples
In response to feedback that there should be more examples, the final guidance includes several new illustrative examples considering in-contract price increases, cancelled bookings, damage deposits and jurisdiction and choice of law. The inclusion of text describing a termination that was found to be fair (paragraph 6.66 of the guidance) and an added example of a "more likely to be fair term" describing a termination fee (at page 110 of the guidance) are worth noting, in light of the CMA's annual plan highlighting such fees as a possible area of focus.
What businesses should do now
The final guidance confirms that the substantive law has not changed, but the enforcement risk around it has. With the CMA actively pursuing unfair terms investigations, with the power to wield large fines, businesses cannot treat this guidance as a compliance formality.
In practice, this means B2C businesses should prioritise a review of: (i) exit or termination fees, particularly given the CMA's interest in them; (ii) how terms are presented in digital journeys, in light of the CMA's expanded (if non-exhaustive) list of transparency techniques; and (iii) cancellation, price variation and jurisdiction clauses, which the CMA has now addressed through new illustrative examples.
Given the CMA's evident appetite to test these principles through live enforcement action, businesses that wait for the current investigations to conclude before reviewing their own contracts may find themselves reviewing them under considerably more pressure.
If you need our help to review your business practices, please contact us, or consult our Consumer Law Hub.
