Crackdown planned for online rip-offs and fake reviews

Businesses offering subscriptions will be required to make clear exactly what consumers are signing up for and allow them to cancel easily.

The government also said that “consumer catfishes” responsible for fake online reviews would be targeted with rules making it automatically illegal to pay someone to write or host a fake review. Fake reviews are a serious problem for large online marketplaces such as Amazon, Facebook and Google on which third-party sellers and businesses compete, with dishonest incentives being widely offered for five-star reviews in some areas.

Regulators will also be helped to stamp out other dodgy tactics used to manipulate people browsing for goods and services online. These include tactics that manipulate consumers into spending more than they wanted to, along with 'negative nudges' such as items receiving a boost in rankings on a platform while hiding the fact that it is sponsored.

The law will be altered such that prepayment schemes such as Christmas savings clubs have to safeguard customers’ money. The government explained it hopes to prevent a repeat of scandals such as Farepak, in which many people on low incomes lost their Christmas savings when the company collapsed.

For sectors in which consumers make large one-off purchases, such as used car dealerships and home improvement, the government will force businesses to take part in arbitration or mediation when disputes arise, helping avoid consumer complaints going to courts; cases which often take months or even years to settle.

Kwasi Kwarteng, the business secretary, said: “The UK’s economic recovery relies on the strength of our open markets and consumers’ faith in them. By delivering on our commitment to bolster our competition regime, we’re giving businesses confidence that they’re competing on fair terms and the public confidence they’re getting a good deal.”

The proposals are part of a wider consultation on reforming competition and consumer policy to give the Competition and Markets Authority enhanced powers to tackle consumer rip-offs and other bad business practices. Under the plans, the watchdog will be able to conclude investigations faster and impose stronger penalties on firms breaking the law or failing to co-operate with its work.

Tough penalties will be introduced for non-compliance, with lawbreaking businesses facing fines of up to 10 per cent of their global turnover. Businesses that refuse or give misleading information to enforcers could face civil fines. The regulator would be able to impose penalties for companies that do not comply with its investigations or orders equating to up to 5 per cent of annual turnover, plus daily penalties up to 5 per cent of daily turnover while any non-compliance continues. Company directors making false declarations to the regulator could be disqualified.

The regulator would also be able to block a wider range of harmful mergers, including so-called “killer acquisitions”, in which larger businesses acquire competitors before they can launch new services or products.

Paul Scully, a minister with responsibility for small businesses, said: “Business is built on trust. When consumers part with their hard-earned cash, they’ve got every right to expect they’ll get their money’s worth. Cowboy builders aren’t welcome in 21st-century Britain. As we build back fairer, we will protect the UK public from being hoodwinked and help small businesses thrive.”