CMA open letter to businesses on urgency and price reduction claims

What are urgency and price reduction claims and when will they breach consumer protection laws?

The question

What are urgency and price reduction claims and when will they breach consumer protection laws?

The key takeaway

“Sneaky” sales tactics (such as urgency claims and misleading price reduction claims) are likely to constitute a breach of consumer protection laws and constitute a criminal offence. Businesses that sell online should be aware of the sorts of practices prohibited by consumer protection law and ensure that they are not utilising these tactics.

The background

The Competition and Markets Authority (CMA) has become increasingly concerned that businesses are using “pressure selling tactics” to encourage consumers into buying their products or services online. Such practices can amount to a criminal offence under the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) – which are soon to be updated and republished in the statute books within the Digital Markets, Competition and Consumers Act 2023 (DMCC).

On 29 March 2023 the CMA published an open letter to all UK online businesses that sell or advertise their goods and services online. The letter reminds businesses what their obligations are under the law in respect of urgency and price reduction claims and what may constitute an infringement of the law. At the same time a number of examples have also been published clearly showing the sorts of messaging and imagery that is likely to fall foul of the CPRs.

The development

The open letter focuses on two types of tactics that businesses may use: (i) urgency claims and (ii) price reduction claims. The key point is that businesses should not use these tactics where they are misleading, untrue or put pressure on consumers. This means that merely stating “only five left in stock” will not in itself be unlawful, as long as there are indeed only five of the relevant product available for sale to consumers.

Urgency claims

• Time limited claims, such as “offer ends in X days, X hours and X minutes”. This is a tactic used where the business tells consumers that a specific offer will expire in a specified time. If, when the time runs out, the offer does not expire, this is likely to be unlawful as it is untrue and was only used to pressure the consumer into buying the product at that time on the basis that it would not be available at that price after such time.
• Popularity claims, such as “Hurry, 10 people have now purchased this item” or “20 people are viewing this item now”. The idea behind these claims is to demonstrate to the consumer that there is a lot of interest in the product. These will be unlawful where the business’ algorithm that produces the claims are not providing accurate data for that moment in time. For example, it might be that 10 people purchased the item yesterday or that 20 people viewed the item within the past 2 hours, but not at that exact moment in time.
• Scarcity claims, such as “limited availability left”. This tactic encourages impulsive and fast purchasing decisions by consumers by implying that stock levels are low so if the consumer does not act with urgency, they will not be able to purchase the product. This is likely to be unlawful where stock levels are not low, or are at least high enough to mean the business can fulfil its contracts for that day (including in the event where stock is low but more is due to arrive).

Price reduction claims

• Any discount, special offer or reduction that refers to a higher comparison price, such as “Was £100, now £45”. One example of a price reduction claim that would be unlawful is where the comparison prices are inaccurate because the business no longer sells the product at that price. As an example, a business might advertise that it is selling its product for £50 down from £80. However, if the business has actually been selling the product at £50 for several months, this means the “higher” comparison price the business is using is not the product’s everyday selling price anymore. This gives the consumer the false impression of the price advantage they are getting on the product.

The CMA has also launched a new phase of its “Online Rip-Off Tip-Off” campaign which aims to enable consumers to report businesses that are engaging in misleading sale tactics (including those outlined above, as well as fake reviews, concealed charges or fake subscriptions). The campaign was introduced following a survey which showed that 67% of the 3,700 UK adult participants say the pressures associated with the cost-of-living crisis have made them more desperate to find cheaper, more affordable deals. It was also found that 24% of UK consumers have been subject to misleading online sale tactics. The online report form also offers advice on how to identify any sneaky sales tactics.

Why is this important?

In a day and age where e-commerce forms such a large percentage of retail sales, the CMA needs to ensure businesses are not employing unfair sales tactics, particularly given the current cost of living crisis where consumers are more interested that ever in getting “a good deal” on their purchases. With the DMCC set to give the CMA direct enforcement powers and the ability to fine businesses directly where it determines there has been a breach of consumer protection law, it is clear we are entering a new era of enhanced consumer protection in the UK, which all traders need to be ready for.

Any practical tips?

Businesses should be reviewing their current sale tactics to ensure that they are not employing urgency and price reduction claims that put unfair pressure on consumers. All sale tactics must be compliant with the CPRs (or DMCC once this is in force – likely to be Spring 2024), as well as taking guidance from the promotions section of the CAP Code more generally and the Chartered Trading Standards Institute Pricing Practices Guidelines.

Summer 2023