The Competition and Markets Authority (CMA) has recently published updated guidance on unfair contract terms.

The updated CMA37 guidance focusses on Part 2 of the Consumer Rights Act 2015, which protect consumers from unfair contract terms and notices used between businesses and consumers. Whilst the law remains unchanged, the new guidance reflects developments in consumer law over the last decade.

Shorter guidance with more examples

The updated guidance is significantly shorter, with almost half of the content dedicated to discussing examples of potentially unfair terms and notices. 

The CMA has emphasised that fairness is highly fact-specific and context-dependent, so it has not gone so far as to provide proscriptive rules, a sector-based guide or a Red-Amber-Green rating system. However, it does set out terms which are “unlikely to be fair” and “more likely to be fair” covering:

• exclusions, limitation and disclaimers;
• variations;
• termination and breach by consumers;
• termination and breach by traders;
• automatic renewal; and
• dispute resolution,

with specific reference to digital content as well as goods and services.

Standalone principle of transparency

The revised guidance places greater emphasis on practical compliance, transparency and ensuring consumers can understand the implications of terms before agreeing to them. A business cannot assume a term is fair simply because it is somewhere in the contract.

The CMA increasingly expects businesses to consider how an average consumer will actually interact with and understand the term. The updated guidance warns that a term that technically discloses a cost or restriction may still attract scrutiny if the overall presentation is structured in a way that takes advantage of predictable consumer behaviour. The CMA expressly links the concept of good faith to consumer behaviour and expects businesses to avoid exploiting well-known consumer biases, such as:

• consumers' tendency not to read lengthy standard terms;
• consumers focusing on immediate benefits while discounting future costs;
• consumers overlooking renewal, cancellation or termination provisions; and
• consumers paying insufficient attention to information that is hidden, poorly signposted or presented at the wrong time.

The updated guidance confirms that the transparency requirement is a standalone legal obligation, whilst recognising the fairness test is more likely to be met where there is transparency: a term is more likely to be reasonable and enforceable when it is brought to the consumers’ attention and sets out the obligations in clear, simple language. 

Businesses should review how key terms are presented during the customer journey, considering this latest guidance alongside the CMA’s separate discussion paper on Online Choice Architecture (which remains a key area of focus for the CMA). 

Drafting terms for vulnerable consumers

Practices are unfair if they are likely to cause the “average consumer” to take a transactional decision they would not have taken. This is an objective standard, not dependent  on the characteristics or perceptions of any individual or group of individuals. The updated guidance does not change the definition of “average consumer”, which remains the traditional "reasonably well informed, observant and circumspect" standard. However, the nature of the “average consumer” is context-specific and can change depending on the situation and contract in question. 

Businesses should not assume that all consumers will be assessed purely against a theoretical "average consumer" benchmark. The attention and understanding expected of the average consumer will differ between contracts and the category of goods or services in question. 

Since 2025, the CMA's consumer enforcement framework has increasingly focused on outcomes for consumers, including situations where characteristics of a target audience may make them more susceptible to harm. Focus groups can help businesses ascertain their “average consumer” and identity whether additional steps are required to help vulnerable consumers with reading and understanding the terms of the contract.

Financial impact of infringement

Unfair and prohibited terms and notices are not binding on consumers, which means businesses cannot rely on those terms, and may have to repay money paid by consumers. 

Aside from challenges brought by individual consumers, the Digital Markets, Competition and Consumers Act 2024 enables the CMA, Trading Standards and sector regulators such as Ofcom to take action under a court-based enforcement regime. The updated guidance reflects that the CMA may now investigate, determine and take enforcement action (including imposing penalties) to address breaches of the unfair contract terms without going to court under a direct enforcement regime. For substantive consumer law breaches, the CMA can impose penalties of up to:

• 10% of worldwide annual turnover, or
• £300,000,

whichever is greater.

The CMA can also fine businesses for failing to comply with information requests or otherwise obstructing investigations. These penalties can reach 1% of global annual turnover, or £30,000, whichever is greater. 

Priority terms to review

It is important that businesses regularly review their terms and conditions in full, to ensure they remain fair, transparent and comply with consumer law. The updated guidance is not legally binding, but it does explain that the CMA is likely to scrutinise practices where businesses:

• prominently advertise a free trial but downplay subsequent charges;
• make cancellation rights difficult to find or understand;
• use automatic renewal structures that consumers may not reasonably anticipate;
• bury important fees, restrictions or termination consequences within dense contractual wording.

These terms should be prioritised in any contract review. Businesses should also regularly assess customer feedback and complaints for trends indicating that expectations are not being met. Key marketing materials and notices need to be updated, both in terms of content and presentation, where the data reveals the terms have more than one possible meaning or consumers are confused as to their scope and effect. 

If you would like any assistance reviewing and updating your consumer terms and conditions, please contact a member of the commercial team.