CMA launches major action on online pricing: what businesses need to know

The UK’s Competition and Markets Authority (CMA) has announced a major enforcement drive using its new powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA). This marks a more assertive approach to online pricing practices which the CMA say risk misleading or pressuring consumers.

What has the CMA done?

As its first action under the new regime, the CMA has:

• opened investigations into eight businesses; and
• issued 100 advisory letters across 14 different sectors, urging firms to review their pricing practices.

These steps follow a cross-economy review of more than 400 businesses to assess compliance with price transparency requirements.

What is the CMA concerned about?

The regulator is targeting practices that are said to distort or obscure the true cost of goods and services, including:

• Drip pricing - introducing mandatory fees part-way through the purchase journey.
• Misleading countdown timers - suggesting undue urgency where no genuine time-limited offer exists.
• Default opt-ins - pre-selecting optional extras unless consumers actively opt out.

The CMA believes these tactics can pressure people into buying quickly or spending more than they intended. Unfair Commercial Practices have been banned since the introduction of the Consumer Protection from Unfair Trading Regulations 2008, however, the DMCCA has amended and expanded the list of practices. The CMA has issued guidance on how it expects business to comply.

Investigations launched

The CMA’s first enforcement cases span various sectors and have been instigated against the following businesses:

• StubHub and viagogo - regarding presentation of mandatory fees on secondary ticketing sites.
• AA Driving School and BSM Driving School - concerning inclusion of compulsory charges in upfront pricing.
• Gold’s Gym - in relation to a one-off joining fee introduced mid-sign-up.
• Wayfair, Appliances Direct and Marks Electrical - regarding time-limited promotions and/or default opt-ins.

At this stage, the CMA has not reached findings in any of these investigations.

Broader scope of investigations

In parallel, advisory letters have been sent to 100 businesses after concerns were identified across sectors including travel, transport, homeware, ticketing, fitness, food delivery, parcel services and fashion. The CMA does not routinely identify the names of businesses which are sent advisory letters, but it will be very important for those businesses to respond promptly and carefully.

Enhanced enforcement powers

Almost all businesses with a consumer facing element will be affected by the CMA’s actions and, importantly, should take note of the CMA’s new and weighty powers.

The DMCCA significantly expands the CMA’s powers. The authority can now:

• Reach decisions on whether consumer law has been breached without court proceedings
• Require businesses to compensate affected customers; and
• Impose fines of up to 10% of global turnover for consumer law infringements.

Further fines can be imposed for breaching undertakings which have previously been given, and daily penalties can be charged for companies which fail to provide information when requested or conceal evidence.

What businesses should do now

This announcement represents the CMA’s first major use of its strengthened consumer protection toolkit and puts all businesses on notice that action will be taken for non-compliance.

Businesses with any consumer facing element - and especially those using fees, add-ons, promotional claims or timed offers - should audit their existing consumer journey and pricing models, in particular their:

• online pricing architecture, including how and when any fees or charges are added during the purchase process
• use of countdowns, “sale” representations and opt-ins; and
• internal policies, systems and marketing practices.

Any business which is unsure whether it is affected by the CMA’s reach should obtain legal advice sooner rather than later to ensure compliance and prepare for any required changes to its current model.

Hamlins has experience across sectors advising clients with all aspects of their business in relation to compliance with consumer law. We act for clients in claims involving alleged mis-selling, unfair practices, and credit disputes, both in court and through alternative dispute resolution, and advise on all aspects of complaints and proceedings before the Financial Ombudsman Service (FOS); regulatory oversight and enforcement by the Financial Conduct Authority (FCA); the approach by the Competition and Markets Authority (CMA) to the use of its consumer powers; and Trading Standards investigations and enforcement.

With increasing regulatory scrutiny and evolving consumer protection laws, we believe it essential for our clients to have a trusted legal partner who can navigate these complexities and safeguard their best interests. Please get in touch to find out more about how we can help you.