What Happened — Full Details
- What the CMA Is Investigating
- The CMA is probing eight companies for potential violations of consumer law under its new digital‑market powers (granted by the Digital Markets, Competition and Consumers Act 2024). (Wired Gov)
- These investigations focus on online pricing practices, specifically:
- Drip pricing (advertising a low headline price, but adding mandatory fees later in checkout) (GOV.UK)
- Misleading time-limited offers (e.g., countdown timers that pressure consumers) (Yahoo Finance)
- Automatic opt-ins for optional extras or services. (GOV.UK)
- The eight firms under review are:
- StubHub and viagogo (ticketing) (GOV.UK)
- AA Driving School and BSM Driving School (Wired Gov)
- Gold’s Gym (gym / fitness) (GOV.UK)
- Wayfair, Appliances Direct, and Marks Electrical (retail / homeware) (The Guardian)
- New Enforcement Powers
- These are the first enforcement cases the CMA has opened under its new consumer‑protection powers from the Digital Markets, Competition and Consumers Act 2024. (GOV.UK)
- Under these powers, if the CMA finds companies have broken the law, it can:
- Wider Action
- In addition to the eight investigations, the CMA is sending advisory letters to 100 other firms across 14 sectors. (GOV.UK)
- These letters warn about risky online-pricing tactics (hidden fees, drip-pricing, misleading timers, default opt-ins). (Wiggin LLP)
- The CMA also published final guidance for businesses on how to comply with UK price transparency rules. (GOV.UK)
- CMA’s Rationale
- Current Status
- No conclusions yet: The CMA has not yet found that these companies have broken the law — investigations are just beginning. (Wired Gov)
- These investigations are under active enforcement and may lead to more formal action, depending on findings.
Case Studies & What It Means
Here are some realistic scenarios (“case studies”) for how these investigations could play out for specific companies:
- Ticketing Firms (StubHub / Viagogo)
- Alleged Issue: Not including mandatory service fees, booking fees, or admin charges in the upfront ticket price; adding them later in the checkout process (drip pricing). (GOV.UK)
- Potential Impact: If proven, these firms may be forced to clearly display full ticket cost from the start, or change their fee structure. They might also have to compensate consumers who were misled.
- Strategic Risk: They could lose consumer trust, especially among price-sensitive users who feel “baited” by hidden fees.
- Driving Schools (AA Driving School, BSM)
- Alleged Issue: Mandatory booking or administration fees not shown in the initial price — consumers may only see them later in payment. (Wired Gov)
- Potential Impact: They may need to revise how they present pricing on their websites / booking flows, and possibly change their fee policy.
- Strategic Risk: If forced to show full cost earlier, their “headline” low-cost ads may become less attractive to learners — affecting conversion rates.
- Fitness (Gold’s Gym)
- Alleged Issue: A one‑off joining fee being hidden during sign-up – only revealed after initial steps, not part of the advertised “membership price.” (The Guardian)
- Potential Impact: Must clearly include or disclose joining fees upfront in marketing and during the checkout/subscription process.
- Strategic Risk: Could make their membership appear more expensive, which may reduce sign-ups.
- Retailers (Wayfair, Appliances Direct, Marks Electrical)
- Alleged Issues:
- Potential Impact: These retailers may need to remove or clearly disclose upsells, and change how they present “deal” timers.
- Strategic Risk: Removing or clarifying these tactics might reduce margin on value-added services or change how they structure promos.
Commentary & Analysis
- Sarah Cardell (CMA Chief Executive):
- Legal / Regulatory Perspective:
- According to Wiggin LLP, this is a significant step: the CMA is using new enforcement tools that let it act directly under the Digital Markets, Competition and Consumers Act 2024. (Wiggin LLP)
- They note that practices like drip pricing and hidden mandatory fees were already problematic under older consumer laws, but the new regime strengthens the CMA’s ability to enforce. (Wiggin LLP)
- Consumer Protection Angle:
- The CMA’s move is being welcomed by consumer advocates: it targets “sneaky” pricing tactics that many customers find confusing or unfair. (The Guardian)
- By sending advisory letters to 100 firms across many sectors, the CMA is signaling that transparency is not optional — firms must review their pricing structures now. (GOV.UK)
Risks & What to Watch
- Risk for Firms Under Investigation: If the CMA finds they broke the law, they could face heavy fines (up to 10% of global turnover) and be required to pay customer compensation. (GOV.UK)
- Reputational Risk: These investigations could damage customer trust, especially for ticketing sites (StubHub / Viagogo) if hidden fees are confirmed.
- Business Model Changes: Companies may need to adjust their business models — e.g., rethink “opt-in” upsells, change how they run “limited time” sales, or restructure pricing.
- Broader Impact: The advisory letters to 100 other firms suggest the CMA may expand its crackdown. More firms could come under pressure to reform pricing practices.
- Compliance Costs: Firms may need to invest in compliance — redesigning websites, changing checkout flows, training staff — to align with the CMA’s pricing guidance.
- Here’s a detailed case-study analysis and commentary for the UK CMA’s investigation into eight firms over suspected “digital drip-pricing” in online advertising:
Case Studies / Scenarios
Case Study 1: Ticketing Firms (StubHub & Viagogo)
- Alleged Issue:
- Headline ticket prices don’t include mandatory service or booking fees, which are only revealed later in the checkout.
- Potential Impact:
- Ads and websites may need to display full price upfront.
- Failure to comply could lead to fines or consumer compensation.
- Strategic Risk:
- Loss of trust among users who feel “baited” by hidden fees, possibly reducing sales or platform loyalty.
- Recommended Action:
- Audit ticket pricing flows. Ensure total cost is transparent from first display.
- Document fee structures to demonstrate compliance.
Case Study 2: Driving Schools (AA Driving School, BSM)
- Alleged Issue:
- Mandatory booking or administration fees are not included in the advertised price.
- Potential Impact:
- Pricing display may need redesign to comply with CMA rules.
- Potential compensation or legal action if misleading fees are confirmed.
- Strategic Risk:
- Headline low-cost offers may appear less attractive if fees are upfront, potentially reducing conversion rates.
- Recommended Action:
- Review all online pricing, ensure clear upfront disclosure of all fees.
- Adjust marketing messaging accordingly.
Case Study 3: Fitness / Gym (Gold’s Gym)
- Alleged Issue:
- Hidden joining fees during sign-up, not visible in advertised membership price.
- Potential Impact:
- Must disclose full price upfront in advertising and on websites.
- May need to refund or compensate misled consumers.
- Strategic Risk:
- Could reduce sign-ups if total membership cost seems higher upfront.
- Recommended Action:
- Update marketing and digital assets to clearly show joining fees.
- Communicate pricing changes to customers proactively.
Case Study 4: Retailers (Wayfair, Appliances Direct, Marks Electrical)
- Alleged Issues:
- Misleading time-limited offers with countdown timers.
- Default opt-ins for optional extras (installation, recycling services).
- Potential Impact:
- Must disclose optional extras clearly and allow easy opt-out.
- Must ensure countdown timers reflect actual offer conditions.
- Strategic Risk:
- Could reduce margins on add-ons or change promotional effectiveness.
- Recommended Action:
- Audit all promotions and checkout flows.
- Clearly separate mandatory costs from optional services and show transparency in real-time pricing.
Expert Commentary & Analysis
- CMA Chief Executive, Sarah Cardell:
- Emphasized the need for price transparency, ensuring that “the price they see is the price they’ll pay.”
- Legal / Regulatory Perspective (Wiggin LLP):
- The CMA is now empowered under the Digital Markets, Competition and Consumers Act 2024 to take direct enforcement action.
- Practices like drip pricing and hidden fees were already under scrutiny under older consumer law, but the new powers give the CMA more teeth.
- Consumer Advocacy Perspective:
- The crackdown is welcomed as it targets deceptive pricing that confuses or misleads consumers.
- Sending advisory letters to 100 firms signals that price transparency is mandatory across sectors.
Key Risks for Firms
- Financial:
- Fines up to 10% of global turnover and mandatory consumer compensation.
- Reputational:
- Exposure of misleading pricing may erode consumer trust.
- Operational:
- Required changes to digital interfaces, checkout processes, and advertising campaigns.
- Regulatory Expansion:
- Advisory letters to 100 firms indicate further investigations are likely, putting additional sectors on alert.
Recommendations for Affected Firms
- Conduct a full audit of online pricing, fees, and checkout flows.
- Ensure all mandatory fees are included upfront in advertising and marketing materials.
- Review promotional countdowns and opt-in services for compliance.
- Document all steps and maintain evidence of compliance to respond to CMA inquiries.
- Communicate transparently with customers if pricing structures change to avoid reputational damage.
- Alleged Issue: