With the Competition and Markets Authority (CMA) about to gain new “super” powers to enforce consumer law, consumer law compliance is likely to rise up traders’ agendas to become a C-suite issue.  To bolster Lewis Silkin’s consumer regulatory and investigations offering, Lewis Silkin recently welcomed Jen Dinmore into our Digital, Commerce and Creative team from the CMA. Before leaving the CMA, Jen held the position of Director of Consumer Protection and led CMA investigations into breaches of consumer law.

Jen joined Geraint Lloyd-Taylor, co-head of Lewis Silkin’s Advertising & Marketing team, to discuss the changes to the CMA’s consumer powers coming in next year via the Digital Markets, Competition and Consumers Act 2024 (DMCC Act). They also talked through some top tips for businesses when dealing with the CMA and some of the hot topics currently on the CMA’s radar. 

A full recording of the session is available here, and below we set out a high-level summary of the key takeaways. 

How will the DMCC Act change the CMA’s consumer enforcement powers?

• The CMA will be able to make a finding of a breach of consumer law itself, rather than having to take the matter to court for a determination. The CMA will therefore be able to order businesses to stop engaging in practices which the CMA finds are in breach of consumer law.
• The CMA is getting its own fining powers, with the ability to levy fines of up to 10% of a business’s global turnover for a breach of consumer law. 
• In addition, the CMA will also be able to issue fines in circumstances other than a breach of consumer law. For example, if a business fails to comply with an information notice, or if a business breaches undertakings it has given to the CMA under the new powers. In these instances, the CMA will be able to levy a fine of up to 1% and 5% of that business’s global turnover respectively.

How do we expect the CMA to behave with these new powers?

• It is likely that we will see CMA using these new powers; we suspect that the CMA will want to demonstrate that these new powers were necessary, and they can use them effectively (particularly given they have been asking for them since 2019).  
• The pace of investigations is likely to change, and we are expecting timelines to be punchier. This is because there is a duty of expedition in the DMCC Act, which states that the CMA will have to have regard to the need for making a decision or taking an action as soon as reasonably practicable. The CMA has published draft guidance setting out its proposed enforcement process for the new powers, in which it is clear that the CMA will expect parties to co-operate with the timetables it sets and will take account of this duty when setting deadlines and considering extensions to them. 
• Be prepared for penalties. The CMA draft guidance referred to above sets out how the CMA is proposing to use and calculate penalties. From that guidance we can see that there will be a process for seeking undertakings, but we expect that, where they don’t address the CMA’s concerns, the CMA won’t hesitate to move to levy penalties against businesses. 

Jen’s Top Tips about consumer law investigations

• Failing to prepare is preparing to fail. As mentioned above, investigation timetables set by the CMA under the new powers are likely to be a lot crisper, and therefore there will be less time to deal with things as and when they happen. It is therefore important to raise awareness of the new powers and the associated risks internally ahead of time.  In particular, if not already in place, business should implement contingency plans in the event that an investigation lands. For example, ensuring you are clear on who will do what to gather evidence in response to a CMA information notice and have a plan for how you would deal with a CMA “dawn raid”.
• If you’re contacted by the CMA – don’t panic! But do act quickly in raising awareness internally and escalating the issue within the business. Businesses should be in litigation mode - in particular, taking care with communications both internally and with the CMA.  
• Who’s who? Think strategically about who and how best to present your case; in doing so take into account how you want to come across and who is best placed to make points of detail about your business. 
• Finally – a warning: there is no safety in numbers. The CMA has broad discretion to choose whom to take action against, and as long as this discretion is exercised in a rational way, it is hard to challenge. So don’t take comfort from the fact that your practices may be commonplace in your particular sector – this is unlikely to help your case. 

Pricing is a hot topic!

A key focus in the CMA’s Annual Plan for 2024/2025 was for it to support consumers and help contain cost of living pressures.  In the CMA’s update on this work in July 2024, it cited its scrutiny of a range of pricing issues to protect consumers from unfair or misleading practices. As those same cost of living pressures are still hitting consumers, we suspect that pricing is likely to continue to be on the CMA’s radar in 2025. 

An overview of some of the key pricing issues are as follows: 

1. Drip pricing: this is where consumers are shown an initial price for goods or services, but additional fees are revealed later in the consumer journey. Under the new DMCC Act, the Consumer Protection from Unfair Trading Regulations 2008 are being tweaked to clarify that mandatory charges and mandatory variable charges should be displayed upfront. In addition, it is also bringing a significant change linked to enforcement – under the present regime to demonstrate an unfair commercial practice, if pricing information is missing, the CMA has to show that the omission has an impact on the transaction decision of the average consumer. However, under the new law this test no longer applies to missing material information, such as pricing information. Not having to meet this test for missing pricing information is likely to make it easier for the CMA to enforce drip pricing cases. 
2. Reference pricing: this is a price promotion which aims to demonstrate good value by referring to a previous higher price. The CMA has this year issued principles to those selling mattresses online about this specific topic, which may have broader application. It has also recently announced that it is bringing a court case against Emma Sleep which includes concerns over reference pricing (for more information, see our article here.
3. Unit pricing, price marking and loyalty pricing: Unit pricing is the labelling system that sets out the price per unit (e.g. cost per kg). Price marking is the practice of displaying the price of a product on or near that product and loyalty pricing is a dual pricing system where there is a standard price and another price which applies to loyalty scheme members.

The CMA has recently been scrutinising all three of those practices in the grocery sector.  In respect of unit pricing, the CMA issued an open letter to grocery retailers warning about non-compliance. CMA found there was non-compliance of price marking requirements, particularly amongst symbol convenience stores. We are expecting CMA conclusions on loyalty pricing soon.  The relevant law is the Price Marking Order 2004 (PMO) and following calls from the CMA for changes to be made to it, the Price Marking (Amendment) Order 2024 was recently laid before Parliament. This makes changes to the PMO which will come into effect next year (for more information, see our article here.

4. Dynamic pricing: this is where pricing changes according to demand and means consumers can end up paying more during busier periods. This practice doesn’t breach consumer law per se, but it must be transparent, and it mustn’t mislead consumers. The CMA has recently launched an investigation into Ticketmaster on this issue in respect of its pricing of Oasis tickets (for more information, see our article here.

To avoid attracting scrutiny from the CMA, and being on the receiving end of its new enforcement powers, it’s worth keeping an eye out for developments in these areas and any guidance they provide. We will also provide updates, so do keep in touch!