CMA online pricing practices update

CMA launches major consumer protection drive focused on online pricing practices

CMA opens investigations into 8 businesses, issues advisory letters to 100 firms and publishes finalised guidance for businesses.

·    Investigations opened into StubHub, viagogo, AA Driving School, BSM Driving School, Gold's Gym, Wayfair, Appliances Direct and Marks Electrical

·    Cases are the first launched by the CMA using its new consumer protection powers and follow a cross-economy review of online pricing and sales practices

·    CMA is writing to 100 businesses across 14 sectors outlining concerns about their use of additional fees and sales tactics

·    New guidance to help businesses comply with the law on price transparency also published

The Competition and Markets Authority (CMA) is announcing a major package of action covering online pricing practices, including drip pricing and pressure selling, under the new Digital Markets, Competition and Consumers Act 2024 (DMCCA). This move will ensure people can shop with confidence and fair-dealing businesses can compete on a level playing field.

From the outset of the new regime, the CMA has been clear that it will act to protect consumers, support businesses that want to do the right thing and focus early enforcement action on the most egregious practices which are harmful to consumers.

Since April, the CMA has been conducting a major cross-economy review of more than 400 businesses in 19 different sectors to assess compliance with the rules on price transparency.

Using the results of this review, alongside additional monitoring, the CMA identified potential compliance concerns in 14 sectors, including drip pricing and the use of misleading countdown timers, which are banned under the new regime. Consumers need accurate pricing information to know they are getting a fair deal. This is important for consumer confidence when shopping online and impacts economic growth.

The CMA is taking a two-tier approach based on this work - launching enforcement action and sending advisory letters to 100 businesses - while also publishing new guidance for businesses to help them comply with the law.

The investigations launched by the CMA are the first enforcement cases opened using its new powers, which enable it to decide whether consumer laws have been broken, rather than having to go through the courts. If the CMA finds there has been an infringement of the law, it can order businesses to pay compensation to affected customers as well as fining companies up to 10% of global turnover.

Sarah Cardell, Chief Executive of the CMA, said:

"At a time when household budgets are under constant pressure and we're all hunting for the best deal possible, it's crucial that people are able to shop online with confidence, knowing that the price they see is the price they'll pay, and any sales are genuine.

"Whether you're spending your hard-earned cash on concert tickets or driving lessons, joining a gym or buying furniture and appliances for your home, you deserve a fair deal.

"It's our job to protect consumers from misleading prices and illegal pressure selling and today marks an important milestone as we take action across the economy to make sure businesses do the right thing by their customers.

"Since the launch of the new regime, we've been working hard to help businesses understand the law. But alongside supporting businesses to comply, we've always been clear that we will take swift action where we suspect potentially serious breaches of the law.

"This is just the start of our work. Any businesses who break consumer law should be in no doubt we will stamp out illegal conduct and protect the interests of consumers and fair-dealing businesses."  

Enforcement action

The CMA has opened investigations into 8 businesses that it has reason to suspect have infringed consumer law in relation to their use of fees, use of misleading time-limited offers and/or the practice of automatically opting consumers in for optional charges.

Two of the 8 firms - secondary ticketing sites StubHub and viagogo - are under review regarding the mandatory additional charges applied when consumers buy tickets - and whether or not these fees are included upfront.

The AA Driving School and BSM Driving School are being investigated over their presentation of mandatory fees on these sites. Specifically, whether these fees are included in the total price the consumer sees at the beginning of the purchase process.

Gold's Gym is under investigation over its presentation of a one-off joining fee for its annual membership, and whether the way it presents this fee breaks the law - specifically, introducing it part way through the sign-up process and not including it in advertised membership costs.

Homeware retailers Wayfair, Appliances Direct, and Marks Electrical - are being investigated to determine whether their time-limited sales ended when they said they would, or whether customers are being automatically opted in to purchasing additional services. Specifically, the CMA is looking into the conduct of:

·    Wayfair - in relation to time-limited sales

·    Marks Electrical - in relation to default opt-ins

·    Appliances Direct - in relation to time-limited sales and default opt-ins

At this stage, the CMA has reached no conclusions about whether the law has been broken in any of these investigations.

Advisory Letters: Businesses told to review their practices

Based on the results of its compliance sweeps, the CMA is sending advisory letters to 100 businesses, outlining concerns about their use of additional fees and online sales tactics.

The letters target sectors where the CMA identified potential concerns, as well as key areas of spending, such as: holidays (including package travel); driving schools; homeware retailers; rail travel; parking and airport parking; bus and coach travel; luggage storage providers; cinemas; live event tickets; food and drink delivery companies; letter and parcel delivery; gyms and fitness; fashion; and online vouchers.

These sectors collectively serve tens of millions of UK consumers every year. From January to June alone, UK residents made over 44.7 million trips overseas, spending an estimated £38.6 billion. At home, 11.5 million people belong to a gym; almost a third of all British adults - 16.7 million people - order fast food for delivery once a month or more, and one in 10 UK consumers uses secondary ticketing sites - with 72% saying they have concerns about additional fees. The postal sectors also serve a huge quantity of the population, with 10.5 billion parcels and letters being delivered in 2023-2024.

What's more, a report by DBT found that drip pricing was particularly prevalent regarding event tickets (93% of businesses reviewed), cinema tickets (69%), and gym memberships (60%) - all areas where the CMA has taken action today.

These letters put businesses on notice. They must now review their practices and ensure they are in line with the law - and the CMA's Pricing Guidance and Unfair Commercial Practices Guidance - to avoid the risk of future enforcement action.

The CMA will continue to engage with those businesses to ensure they take the steps needed to comply with the law - or otherwise face future enforcement action.

Guidance: Being transparent on prices

While the DMCCA has updated the law on pricing information, certain aspects of drip pricing have long been prohibited under existing consumer legislation.

Practices such as failing to include mandatory charges upfront, introducing unavoidable fees at checkout, and presenting misleading headline prices that exclude compulsory costs have been unlawful for years under the Consumer Protection from Unfair Trading Regulations 2008. This is why the CMA's early enforcement action and advisory letters focus on possible breaches related to these issues.

Other elements of the law have only recently been updated, and the CMA has published its finalised price transparency guidance today, following consultation with businesses.

Notes to editors

1.   Media enquiries should be directed to press@cma.gov.uk or 020 3738 6460.

2.   The consumer protection legislation relevant to the CMA's investigation is the DMCCA and the Consumer Contracts (Information, Cancellation and Additional Charges) Regulations 2013.

3.   There is no legal deadline to complete consumer investigations under the DMCCA. As with all its work, the CMA will progress this investigation at pace, whilst ensuring a robust and detailed review is conducted, and the businesses' rights of defence are respected.

4.   If the CMA provisionally decides that the companies have broken consumer law, it will issue what is known as a Provisional Infringement Notice (PIN). This sets out the CMA's concerns and gives businesses the opportunity to respond. However, not all cases proceed to a PIN.

5.   The CMA's investigation into StubHub covers the activities of stubhub.co.uk. This is a website operated by Ticketbis S.L. and is not connected to or affiliated with StubHub Holdings Inc.

6.   The CMA does not name the companies it sends warning or advisory letters to. As is standard practice, it only names those firms which it opens enforcement cases against.

7.   Under the new consumer regime, if a company infringes consumer protection law, the CMA can fine them up to 10% of their global turnover. If a company breaches undertakings it has given the CMA, it could face fines of up to 5% of its global turnover - with additional daily penalties for continued non-compliance. Failure to provide information when requested (without a legitimate reason), concealing evidence, or providing false information can likewise result in a fine, with penalties of up to 1% of a business' global turnover and additional daily penalties.

8.   The CMA has taken significant action regarding 'Online Choice Architecture', which sought to tackle potentially harmful online selling practices - and included enforcement action against Emma Sleep, Wowcher, and Simba Sleep.

9.   How the investigations unfold will depend on the nature of the evidence obtained. Investigations may result in a finding of unlawful conduct, the imposition of remedies, or closure of the case.