Insights The CMA issues compliance advice to online businesses regarding the use of urgency and price reduction claims, and recommends an “urgent” review of practices

Misleading online sales tactics - the CMA’s recent activity

In 2022, the CMA undertook a major programme of work to assess how online businesses are presenting information and purchasing options to consumers. From an education campaign enabling consumers to report misleading online sales tactics to its extensive research into ‘online choice architecture’ (OCA) (i.e., the design of online environments which affects consumers’ decision making), the CMA has taken increasing steps in the past year to address potentially harmful online practices.

Urgency and price reduction claims – the CMA’s open letter to businesses

Urgency and price reduction claims have become a particular point of focus for the CMA, following increasing concern that these methods are misleading and/or place unfair pressure on consumers.

On 29 March 2023, the CMA published an open letter to UK businesses, providing a reminder of the rules and examples of non-compliant practices.  The letter emphasises that such claims and practices may be illegal under the Consumer Protection for Unfair Trading Regulations 2008 (CPUT Regs).

Claims that are time limited, imply scarcity, or urge consumers to act quickly are considered ‘urgency claims’, whilst a ‘price reduction claim’ refers to a discounted or special offer price tied to a higher comparison price.

Under the CPUT Regs, unfair commercial practices are prohibited and, in some cases, carry criminal as well as civil sanctions. Such practices include those that involve misleading actions or omissions, aggressive commercial practices, and further specific practices listed in the CPUT Regs that are considered unfair in all circumstances.

In its open letter, the CMA sets out the following ways it considers that urgency or price reduction claims could likely distort consumer behaviour and infringe the CPUT Regs:

• including false or deceptive information;
• failing to include significant information that the consumer should be made aware of prior to purchase;
• placing unfair pressure on consumers to finalise their transactions;
• falsely stating that a product will only be available to purchase for a very limited time (or that it will only be available on its current terms for a very limited time) to urge the consumer to make an immediate transactional decision; and/or
• structuring claims in a way that is likely to unfairly impair a consumer’s ability to take informed decisions.

What’s particularly notable about the guidance is how common the example practices are – any consumer of online products/services will recognise these practices. This is a clear message to online businesses that to-date commonplace practices are not considered to be lawful.

Wowcher investigation

In a clear demonstration of the CMA’s intention to take action in this space, the open letter has quickly been followed by the launching of an investigation into Wowcher’s use of countdown timers and other urgency claims. The CMA is looking to assess the use of such claims and sales methods to establish whether the group has broken consumer protection law.

As the UK Government readies itself to introduce a range of major consumer law reforms in its Digital Markets, Competition and Consumer Bill (see our helpful one-page summary here), online businesses should be taking particular care to assess whether their current practices comply with consumer protection law. Under the reforms, the CMA will have significantly increased enforcement powers to take action against breaches of consumer law, including the ability to impose fines of up to 10% of annual global turnover.

It is clear from the CMA’s recent activity and guidance that tackling misleading online sales tactics, particularly urgency and price reduction claims, is high on its agenda. Urgency and price reduction claims must be adequately substantiated with sufficient evidence, and safeguards should be in place such as compliance reviews and verification processes to ensure that consumers are not presented with unfair and/or misleading claims.

The open letter advises online businesses to “urgently” review their current consumer-facing activities – including advertisements, webpages, apps and pop-ups – and stresses that OCA should be designed with the legal requirements of the CPUT Regs in mind to ensure compliance. Such review is particularly timely, given the impending introduction of the Digital Markets, Competition and Consumer Bill and the formidable enforcement powers it will introduce.