CMA probes travel firms over online price practices & new powers

Eight firms operating in the holiday and travel sector are under investigation for their online pricing practices as part of a broader review by the Competition and Markets Authority (CMA) into business compliance with consumer protection law.

Wider review

Since April, the CMA has reviewed more than 400 businesses across 19 sectors to assess compliance with the Digital Markets, Competition and Consumers Act 2024. The focus is on pricing transparency and the prevention of practices that could mislead consumers.

Key legislation

The recent Act aims to tackle pricing concerns in eCommerce and digital sectors. It seeks to protect consumers from misleading prices and illegal pressure selling. The law specifically targets approaches such as drip pricing, where consumers initially see a low price that rises as mandatory fees are added throughout the purchase process. It also addresses partitioned pricing, where the individual components of a cost are listed separately to obscure the total price.

Legal powers

The CMA now has the authority to impose direct fines of up to 10% of a company's annual global turnover for breaches, without needing to take court action. In addition to fines, it can compel companies to pay compensation to affected consumers.

Risks for business

The increased powers mean all consumer-facing firms must closely examine their pricing strategies. The risks extend beyond financial penalties; companies could suffer lasting reputational damage if found to be in breach of the law.

"Today's news is a serious warning shot for all consumer businesses given the CMA's new powers to directly fine traders up to 10% of their annual global turnover for breaches of this legislation, without the need for court proceedings. It can also order businesses to pay compensation to affected customers," said Katrina Anderson, Principal Associate, Mills & Reeve.

Practical advice

Firms already contacted by the CMA have been told to act. Businesses have received letters putting them on notice about suspected breaches and potential penalties.

"If you've received a letter from the CMA, it's time to act. In their own words, these letters put businesses on notice. To be in the best place to avoid enforcement action, you should undertake a full review of your practices to ensure they are in line with the CMA's latest pricing transparency guidance and unfair commercial practices guidance," said Anderson.