Responses in relation to the Competition and Markets Authority's (CMA) new draft guidance on unfair contract terms are invited until 19 March 2026. Whilst new, the CMA has been at pains to emphasise that their proposal is a refresh rather than a substantive rewrite of the existing legal principles. Traders should nonetheless take the time to reflect upon the updated draft guidance and analyse their contractual terms with consumers going forward.
This article gives a brief overview of what the new guidance has to offer.
Accessibility and readability
The bulk of the updates to the guidance aim to strike a balance between accessibility and readability whilst still providing sufficient clarification for traders. This is achieved by a reduction in length, simpler wording, updated flowcharts and the provision of practical examples.
Certain key concepts have been defined more clearly including what is meant by "average consumer", "trader" and "consumer contract". Overall, this reflects a positive step forward for both consumers and traders alike.
Legal tests
The legal tests enshrined by the Consumer Rights Act 2015 in relation to fairness and transparency remain in place. Albeit with a renewed focus and pragmatism, including an acceptance that consumers are unlikely to spend their time reading terms in detail. Therefore, the need for traders to consider not only the content of their terms but their design and timing is emphasised. You can see a strong resonance with the customer understanding leg of the FCA's Consumer Duty.
Traders can continue to rely upon the core and statutory exemptions in relation to some terms. However, the scope of the former is brought into sharp focus, detailing that the transparency and prominence of such terms containing the contract's main subject matter is pertinent to relying upon the core exemption.
Grey List
The new draft guidance takes a different approach when discussing potentially unfair terms, a non-exhaustive list of which is provided under statute in the form of Schedule 2 to the Consumer Rights Act 2015, colloquially known as the 'Grey List'.
Under the new draft guidance, practical examples of terms which could be considered unfair are provided, along with drafting solutions which may tilt their interpretation towards being fair. These examples are analysed thematically and applicable Grey List terms are tied into discussion where relevant.
The previous iteration of the guidance took a systematic approach towards the Grey List, analysing each item individually and providing clarity on what factors would tip the scales towards fairness.
Traders therefore may still find themselves looking towards the old guidance when directly considering an item which appears on the Grey List for an additional, more pointed discussion.
Enforcement
The new draft guidance includes a discussion on the enforcement routes that can be taken by the CMA and other authorities. It has captured the recent changes brought forth by the Digital Markets, Competition and Consumers Act 2024 (DMCC) which in summary provides that:
- The CMA and other regulators can take action under an in-court procedure. The court themselves will establish if a breach of law has occurred, and they can require traders to stop and rectify their conduct or pay a penalty (up to a limit of £300,000 or 10% of global turnover, whichever is higher).
- The CMA alone can now proceed under a direct enforcement regime. They have powers to investigate, determine and enforce breaches.
Conclusion
On the whole, the CMA's assertion that their new draft guidance acts as a refresh is largely correct. Traders need not be concerned about sweeping changes to the law or its interpretation in relation to unfair contract terms.
That being said, traders should continue to reflect upon their contractual terms and consider their obligations under the new draft guidance in light of the increased regulatory oversight, in the form of the CMA's direct enforcement regime.
MFMac regularly advises firms and traders on their terms and conditions to ensure they are fair towards consumers. Please do not hesitate to contact us if you require legal advice or assistance.
