To mark the launch of the new phase of its ‘Online Rip-Off Tip Off’ campaign, the Competition and Markets Authority (CMA) has published an online reporting form, encouraging consumers to report businesses which engage in ‘misleading tactics’ such as pressure selling, hidden charges, subscription traps and fake reviews. Alongside this form, the CMA has issued an open letter to all businesses that are involved in the online sale or promotion of goods, services or digital content to UK consumers to help them avoid certain types of pressure selling and comply with the law. This should be of interest to online retailers, service providers, marketplaces and other businesses that design online stores or produce content relating to price reductions and the availability of products sold online.
Background
The online reporting form and open letter are the latest developments in the CMA’s work to tackle online selling practices that are potentially harmful to consumers. This follows two studies on online choice architecture which the CMA published in April 2022. There are also two ongoing investigations by the CMA concerning the use of countdown clocks and other 'urgency claims' (as further described below), one against Emma Sleep GmbH and its group companies which was launched on 30 November 2022, and the other against Wowcher Limited, LivingSocial Limited and other group companies which was launched on 31 March 2023 shortly after the publication of the online reporting form and the open letter.
Marketing claims made by businesses online have been the subject matter of various investigations and guidance documents issued by CMA over the past few years, often due to concerns over their effects on consumers’ purchasing decisions. If such a claim distorts consumer behaviour, it is likely to amount to an unfair commercial practice which is a criminal offence under the Consumer Protection from Unfair Trading Regulations 2008. This might be the case if, for example, a claim contains untrue information, or information that is deceptive even if the words are literally true, or if a claim fails to clearly state important information that consumers need to make an informed decision, or if it puts unfair pressure on consumers to complete a purchase.
Each of the CMA’s initiatives and guidance documents in this area has focused on the types of practices that have been viewed as problematic by the CMA and/or the sectors where the CMA has found more widespread failures to comply with the relevant consumer law requirements.
The headlines
The CMA’s open letter sets out its compliance advice on two types of online claims by businesses that may mislead or put unfair pressure on consumers in the UK and therefore be in breach of the law: ‘urgency claims’, meaning claims regarding scarcity, popularity or limitation in time, and ‘price reduction claims’, meaning any discounts or special offer prices that refers to a higher comparison price. The compliance advice contains several examples and illustrations to help online businesses understand what type of practices are likely to be of concern to the CMA.
These examples include the following:
- Urgency claims
- Scarcity claims: This is where a claim tells consumers that stock levels are low (e.g. ‘Selling fast – only 3 left’). This would likely be misleading if the trader does not actually have a stock shortage or, even if stock levels are currently running low, new stock will arrive shortly. This is because such claims, whether or not literally true, give consumers a false impression that they must act quickly (usually to make a purchase or place an order) to avoid missing out when there is no need for them to do so.
- Time limited claims: This is where a promotion or offer is presented as only being available for a limited period. If the time runs out but the offer continues, this is likely to be an unlawful claim because it is untrue and may put unfair pressure on consumers to act quickly when there is no real need to rush. The same is likely to apply if, for example, the promotion ends but a new promotion begins which offers substantially the same deal, or if a checkout timer tells the consumer that there is limited time to complete the transaction but the timer restarts when the time runs out.
- Popularity claims: This includes claims telling the consumer about the demand for or interest in a product (e.g. ‘15 people are viewing this now’ or ‘150 sold in 24 hours’). Such claims are likely to mislead if they are untrue or create a false sense of urgency. For example, if a claim referring to people viewing the product ‘now’ is actually based on views in the past hour, this is likely to be misleading. The same applies if a claim referring to sales sold in ‘24 hours’ is not based on the past 24 hours but a 24-hour period some time ago, or if the number of products said to have been sold is not based on sales of the exact same product but instead on various different models under the same brand. A popularity claim is also likely to be misleading if it urges the consumer to act quickly because of high demand but the trader’s stock levels are high (even if the claim is literally true).
- Price reduction claims: The advice sets out several examples of claims of a price reduction that are likely to be misleading because the higher price shown in comparison to the current promotional price is not the product’s usual selling price. This could be, for example, because the product has been offered for sale at the lower price for some time, the higher price was only a temporary hike in price, the price has changed several times over the past few months or the higher price is an old price that was charged a long time ago. The CMA’s view is that all of these claims are likely to give a deceptive impression of the product’s usual selling price and the saving that can be made by purchasing the product now.
In addition to the above, the compliance advice refers to ‘act fast’ claims as a fourth type of urgency claim. Examples of this are ‘Selling fast! Don’t miss out’ and ‘Hurry, today only!’. Such claims may overlap with other types of urgency claims. The compliance advice also emphasises that combining urgency claims and price reduction claims increases the risk of distorting consumer behaviour.
Next steps - what this means in practice
The online reporting form, which was launched by the CMA at the same time as the open letter, allows consumers to report businesses which engage in any form of ‘sneaky online tactic’. This goes beyond urgency or price reduction claims and may include other forms of pressure selling, hidden charges, subscription traps (situations where consumers are trapped in subscriptions that they no longer need, want or possibly knew they had) and/or fake reviews. The CMA can therefore expect to receive more intelligence from the general public which may reveal non-compliance and possibly lead to enforcement actions.
Compliance with the CMA’s advice on urgency and price reduction claims and the relevant consumer law requirements requires engagement from employees and external service providers who design and construct businesses’ consumer-facing websites and/or run online marketing campaigns and promotional activities. This could be built in or form part of the process for the website content and designs to be reviewed for legal compliance before launch, as well as when such materials are updated or refreshed.
The data used as the basis of the online claims also need to be robust and properly recorded as evidence for compliance. Their accuracy should be monitored to ensure that what is presented to consumers is accurate and not misleading.
It is also worth consulting and ensuring compliance with other documents, where relevant, such as the CAP Code, BCAP Code and the Chartered Trading Standards Institute’s Guidance for Traders on Pricing Practices.
Authored by Michiko Jo and Micaela Bostrom.
