Mandatory Alternative Dispute Resolution (ADR) proposed for two non-regulated sectors

The proposals within the consultation highlight that in regulated sectors such as financial services and energy it is generally mandatory for traders to participate in ADR schemes.  However, for sectors where participation is voluntary there is little engagement, particularly amongst small and medium sized enterprises. The government considers this is an area of concern, particularly if those sectors are also ones where consumers are experiencing high levels of harm.

In deciding which sectors should be included within the proposals a core set of criteria were used to identify where mandatory ADR implementation would benefit consumers. This included considering the nature of consumers, nature of purchase, the consumer experience and alternative routes of protection/enforcement available. As a result, the Government is seeking views on whether to make business participation in ADR mandatory in the motor vehicles sector (to include the supply of new and used vehicles and servicing and repair) and in the home improvements market (such as roofing, glazing, plumbing work, or the fitting of flooring, kitchens, or bathrooms).

In practice, mandatory ADR in these sectors would mean that if a consumer has a dispute that they cannot solve directly with the trader within eight weeks, they will be able to ask the trader to enter into an ADR process (such as mediation or arbitration). The business would then be under a legal duty to choose an approved ADR provider and pay for the mediation and/or arbitration process. The consultation states that on average one ADR case costs a business between £250 and over £1,000, depending on case complexity. This is lower than the estimated £1,000 - £1,900 cost of a court case.

In conjunction with the proposal to make ADR mandatory the government has proposed amending the existing ADR regulations, ensuring providers of consumer ADR are assessed and approved and speeding up access to ADR.  

The open consultation for the proposed reforms to competition and consumer policy closes at 11:45pm on 1 October 2021.  Consumers, businesses and those with knowledge and expertise in competition and consumer law and policy are being invited to submit their views here.