Who: Competition and Markets Authority (“CMA“)
When: 27 May 2016
Law stated as at: 15 July 2016
The cloud storage services sector is hardly a shrinking violet. It is estimated to be growing by more than 20% a year, and 3 in 10 of us in the UK now use cloud storage in a personal capacity to back up some of our most valuable possessions – photos, music, videos, personal correspondence and so on.
On 1 December 2015, following reports that some consumers were experiencing problems, the CMA launched a review into cloud storage service providers’ compliance with consumer protection legislation.
On 27 May 2015, the CMA released its findings. There were a lot of positives to take away from the review, which showed that most people (nearly 9 in 10) were satisfied with their cloud storage services. On data security and privacy (one of consumers’ main concerns), the CMA saw little evidence of actual security or privacy problems.
However, the CMA cautioned that some of the terms and practices used by providers were potentially unfair under the Consumer Rights Act 2015 (as reflected by the CMA’s unfair terms guidance). It stated that, if left unchecked, those terms and practices had the potential to cause further harm to consumers in the future.
One of the main problem areas identified by the CMA was a failure to provide pre-contractual information to consumers, as required under consumer protection legislation. In particular, the CMA emphasised that providers should be making sure that:
- consumers are given the right information, before they become bound by a contract;
- advertising reflects the true price of the service; and
- consumers are clear when they are entering into a contract and what the nature of that contract is.
- In conjunction with its findings, the CMA published:
- a checklist for providers on terms to look out for; and
- a 60-second summary for consumers on:
- things to think about before you sign up for a cloud storage service;
- things to look out for once you’ve signed up for a cloud storage service; and
- what to do if things go wrong.
Why this matters:
The CMA’s findings are being shared with the UK government, Which? and the European Commission as part of their own work on terms and conditions. It is also sharing its findings with enforcers in the Consumer Protection Co-operation (CPC) Network and the International Consumer Protection and Enforcement Network (ICPEN), so that other enforcers can consider whether there are similar issues within their own jurisdictions.
Compliance with consumer protection legislation is firmly in the spotlight, both in the UK and across Europe. As well as being important from a regulatory perspective, compliance is crucial to building consumer trust and confidence in a sector in which – according to the CMA – those characteristics are somewhat lacking.
Some providers have already shown willing and have given commitments to provide fairer terms for their cloud storage customers. A summary of the changes made by those providers can be found here.