CMA Tackles Dubious Online Sales Tactics
Key Contact: Declan Goodwin
Author: John Tay
With the continuous growth of the UK e-commerce market, many businesses are unsurprisingly trying to grow their online sales presence. Whilst some businesses have opted for legitimate sales tactics, others have resorted to less-than-honest practices.
New Initiative
Near the end of 2022, the Competition and Markets Authority (CMA) launched its online Rip-Off Tip-Off campaign aimed at raising public awareness on harmful ‘Online Choice Architecture’ (OCA). In a nutshell, OCA refers to the design of a digital environment that influences consumer behaviour. For example, the layout of a website.
OCA can be used positively to benefit consumers by displaying relevant products prominently and providing information in an easily understandable manner. Conversely, a discussion paper issued by the CMA in April 2022 explains that OCA can be used harmfully to:
- distort consumer behaviour by causing them to buy more than they want, at higher prices and without checking availability on other sites;
- weaken competition in the market as businesses are incentivised to compete on attributes that do not benefit consumers. For example, focussing on harmful OCA is often a cheaper way to raise profits compared to investing in product research and development;
- help businesses exploit market power by unfairly limiting competition or squeezing out rivals.
Examples of harmful OCAs include (but aren’t limited to):
- fake price reductions (a misleading “was” price to make the “now” price look better value);
- drip pricing (additional fees are “dripped” through the purchase process);
- “urgent” countdown timers;
- false scarcity claims.
Latest CMA Investigation
In conjunction with the newly announced campaign, the CMA will be conducting an investigation into online mattress retailer, Emma Sleep, to determine whether or not it has misled consumers using harmful OCA. The investigation is focussed on whether Emma Sleep tricked consumers into making purchases under pressure by using countdown timers to falsely imply that a discounted price would soon end. If Emma Sleep is found to have broken consumer protection law, it may face severe sanctions.
New Laws
The Digital Markets, Competition and Consumer Bill is currently passing through the legislative process and intends to significantly increase the CMA’s enforcement powers, including enabling them to directly enforce consumer law through the imposition of fines without needing to resort to court action.
Historically, CMA investigations have focussed on big industry players (TripAdvisor, McAfee, Amazon, and Microsoft). With freed-up resources at their disposal, we may see future CMA investigations which involve a wider variety of industry players.
What can you do?
The CMA has advised businesses, if they aren’t already doing so, to conduct compliance programmes including behavioural audits to determine whether their use of OCA is consistent with consumer protection and competition law.
If you have any questions or would like to ensure that your OCA is legally compliant, please contact our Commercial and Technology Team.
