New crackdown on fake online reviews and subscription traps could save consumers hundreds

Online fake reviews are to become illegal under new measures that give greater powers to crack down on rogue traders.

Consumers will also be better protected from "subscription traps" under the new measures

The average UK household spends around £900 each year influenced by online reviews and pays £60 on unwanted subscriptions, figures suggest.

Under the new law, it will be “clearly illegal” to pay someone to write or host a fake review. A watchdog will have new powers to fine businesses up to 10% of global annual turnover and award compensation to consumers.

There will also be clearer rules to make it easier for consumers to opt out of subscriptions.

Under new rules, businesses must provide clearer information to consumers before they enter a subscription contract, send a reminder that a free trial or low-cost introductory offer is coming to an end and ensure consumers can leave a contract in a “straightforward, cost-effective and timely way”.

Prepayment schemes like Christmas savings clubs will also have to safeguard fully customers’ money through insurance or trust accounts.

The legislation will provide protection for shoppers’ savings clubs – where consumers can pay for goods and services in instalments throughout the year – which are not currently covered by the Financial Services Compensation Scheme.

It means even if the company goes bust, shoppers’ money will still be protected and it aims to prevent issues such as the collapse of Christmas savings club Farepak in 2006, when thousands of customers were unable to pay for festive gifts.

The Competition and Markets Authority (CMA) will be able to award compensation to consumers and directly impose financial penalties worth up to 10% of global annual turnover for businesses or up to £300,000 in the case of an individual.

Consumer Minister Paul Scully said: ”We’re making sure consumer protections keep pace with a modern, digitised economy.

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“No longer will you visit a five star-reviewed restaurant only to find a burnt lasagne or get caught in a subscription in which there’s no end in sight. Consumers deserve better and the majority of businesses out there doing the right thing deserve protection from rogue traders undermining them.”

Citizens Advice director of policy Matthew Upton said: “With pressure piling on household budgets, it’s good to see action that’ll make it easier for people to protect their cash.

“The measures to deal with subscription traps are particularly welcome. We hope these will help bring unscrupulous traders to book and stop shoppers being duped by underhand tactics.”

CMA chief executive Andrea Coscelli said: “This is an important milestone towards strengthening the CMA’s ability to hold companies to account, promote fair and open markets, and protect UK consumers.

“The CMA stands ready to assist the government to ensure that legislation can be brought forward as quickly as possible, so consumers and businesses can benefit.”