Competition watchdog the Competition and Markets Authority (CMA) has raised concerns about the fairness of consumer-facing terms in the cloud storage market. In an open letter, the CMA has invited businesses to review their T&Cs to ensure legal compliance. Reports suggest that Dixons Carphone plc, JustCloud and Livedrive have already committed to fairer terms.
The CMA’s full report on its consumer law compliance review highlights the rapid growth of the cloud sector:
“It is estimated that the European cloud computing market alone could be worth €44.8 billion by 2020 (up from €9.5 billion in 2013).”
The report brings together provider, industry and customer views of the market, and points to areas of concern.
Compliance with consumer law
Along with general problems around transparency, the CMA has particular concerns about terms allowing a cloud provider to:
- unilaterally vary the price, service or contract without giving consumers adequate notice or an opportunity to cancel the contract without penalty;
- terminate or suspend services, particularly without notice;
- automatically renew at the end of a fixed term without giving consumers reasonable notice or the opportunity to cancel (including preventing consumers from exercising their statutory cancellation rights after renewal);
- limit its liability; or
- prevent consumers from bringing legal proceedings in their local courts and under local law.
A handy checklist identifies terms that may cause problems.
Consumer confidence in cloud storage
In its report, the CMA invites providers to increase consumer confidence and trust in cloud storage services. Although the CMA found little evidence of security or privacy problems, it detected concerns by consumers about data security and indicated that a lack of understanding about product features or confidentiality may lead customers to choose unsuitable services.
Competition issues in the sector?
The CMA’s review focused on compliance with consumer protection law but were prepared to take action against any competition issues their findings exposed. Businesses will be glad to learn that no such issues were identified.
Penalties for consumer law failings
Consumers can challenge unfair terms in court and, if a court considers a term to be unfair, it is not legally binding on the consumer. The CMA and Trading Standards may also take enforcement action against businesses to ensure compliance. In a separate consultation in March-April 2016 BIS identified a possible need to boost enforcement, and asked for views on proposals to introduce civil fining powers perhaps imposed by an enforcer or by civil courts at an enforcer’s request. The results of that consultation are under analysis.
And, of course, businesses cannot ignore the potential impact of bad publicity.