The Competition and Markets Authority (CMA) is consulting on draft guidance setting out how prices should be presented to consumers – including delivery charges, booking or admin fees, local taxes, joining fees and other sums that may make up the total price for a product or service. It is particularly concerned about misleading "headline" prices, which don't include additional charges that most consumers will end up having to pay. The deadline for responding is 8September – so if your business would have problems complying with the CMA's proposed approach, now is the time to make your concerns known.
What's this about and why should you be concerned?
The Digital Markets, Competition and Consumers Act 2024 (DMCC Act) includes new provisions outlawing "drip pricing" – which essentially involves promoting an attractive "headline" price to get consumers' attention, without disclosing that consumers are likely to end up paying more because of the addition of further charges (which are typically "dripped in" at the point of purchase).
Whilst this practice was potentially caught by the pre-DMCC Act consumer law regime, the new legislation removes the requirement for the CMA (or any other regulator) to prove that the misleading price affected the consumer's transactional decision-making (provided it was contained in an "invitation to purchase", which is widely defined – see below). This makes it significantly easier for the CMA and other regulators to take enforcement action against businesses over pricing practices of this type, because all they need to prove is that the pricing was misleading (not that it also had an effect on the consumer's behaviour). Bear in mind that the DMCC Act also greatly strengthens the CMA's enforcement powers, enabling it (among other things) to impose fines of up to 10% of annual turnover for infringing UK consumer law.
What is an invitation to purchase?
The CMA's draft guidance suggests that an "invitation to purchase" would include the following:
- A price on a product in a shop or a menu in a restaurant
- An item listing on the website of an online marketplace (and, by implication, any product or service offered for sale on a B2C business' e-commerce website)
- An advertisement of a product or service (whatever the medium) which includes reference to the price of that product or service
What does the CMA's draft guidance say about pricing?
The draft guidance says that prices contained in invitations to purchase need to be "realistic, meaningful and attainable" for the product or service being promoted. For example, if all or most consumers will incur a delivery or booking fee, that should normally be included in the total price. But of course, not all pricing is quite as simple as that.
What if the total price can't reasonably be calculated in advance? An example
Sometimes, it may be impossible to calculate the total price in advance because it varies depending on exactly what the consumer wants to order. Where this is the case, the draft CMA guidance accepts that a different approach may be justified. It gives the example of an advertisement for made to measure curtains, suggesting that an advertisement which included the following information would be compliant:
- From £25 per metre (76 cm drop)
- Delivery £9.95
- Free Delivery Over £50
However, if there was no free delivery option, then the per metre pricing in this example would (according to the CMA's draft guidance) need to include delivery – unless there was a realistic option for the consumer themselves to pick up the curtains from a physical location.
The draft guidance discusses various other examples where the total price may be difficult to calculate in advance, including how to present pricing for holidays/hotels etc, per-transaction charges (such as booking or admin fees) and subscription contracts (e.g. gym membership etc). It also includes discussion of how to present prices during the purchase process on a website, recommending that as soon as the consumer has selected goods or services to put in their basket, then any relevant delivery or other charges should generally be added immediately and displayed as a running total, so as to give a clear indication of the total price that will be payable.
What questions should you be asking yourself?
Think about where your business features pricing in its promotional activity and whether your current approach is likely to be compliant. For most businesses, this will include bricks and mortar retail outlets and consumer-facing e-commerce websites – but if pricing features in your wider advertising and promotional material as well, this would need to be considered too. Advertisements pose particular challenges because there is often limited opportunity to provide detailed information about price (due to constraints of the relevant advertising medium). This may be one area where the draft guidance would benefit from more examples of suggested lawful practice.
Our experience is that the CMA often does respond to constructive engagement. Given the Government's pro-growth agenda, we also think that the CMA will be particularly concerned to ensure that its guidance does not hinder the development of new products and services from which consumers could benefit.
How we can help
We can help you to work out what needs to be in scope of any review of promotional/sales activity (i.e. whether something is likely to be an invitation to purchase) and to what extent particular elements of pricing are likely to be seen as optional or mandatory (if they are mandatory, they must generally be included in the total price). We can also advise you on how to comply with the DMCC Act's pricing provisions and/or how to respond to the CMA's consultation, if you are concerned that certain aspects of it would be difficult to comply with or you feel that a clearer steer on lawful practice would be helpful. Don't forget that the deadline for responding is 8 September.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
