The price isn’t right: CMA review of online pricing practices

As outlined in our article, the Digital Markets, Competition and Consumers Act 2024 (“DMCCA”) introduced new consumer protection rules, including an express prohibition on drip pricing, a practice which involves advertising an initial headline price and then revealing additional mandatory charges later in the checkout process. It also gave the CMA new direct enforcement powers, including the ability to fine companies up to 10% of global turnover if the CMA finds that a business has breached consumer protection law. Now, as Black Friday and the increased volume of shopping that comes with the holiday season approaches, the CMA is taking action to ensure that businesses are transparent when communicating prices to consumers.

Announcing the investigations, the CMA cited its specific concerns to be the use of default opt-ins to purchase additional services, offers that are incorrectly advertised as time-limited and failures to present mandatory fees up front. The CMA has also written warning or advisory letters to 100 businesses across 14 different sectors outlining concerns about their sales tactics, following a major review of the pricing practices of more than 400 businesses.

Additionally, the CMA has published new guidance on price transparency, providing welcome advice for businesses on how to comply with some of the more uncertain aspects of the drip pricing prohibition. This includes guidance on specific charges, such as delivery fees, which until now have been difficult to navigate within the strict letter of the new requirements.

This announcement of a package of actions echoes the approach the CMA has taken in the competition law context, where it has had direct enforcement powers for many years. The combination of ‘hard' and ‘softer' measures is aimed at maximising the effectiveness of its new powers.

With the launch of these investigations and the publication of the new guidance, the CMA is sending a clear message to businesses that misleading pricing is a priority area and that price transparency is to be taken seriously.

Please contact us if you need help with ensuring transparent pricing in accordance with the legal requirements, complying with other consumer protection law obligations or responding to a CMA investigation or letter.

Authored by Jennifer Crust, Micaela Bostrom, Jessica Kelly, and Karman Gordon.