The Competition and Markets Authority (CMA) has secured undertakings from two businesses as part of its programme of work looking at how consumers are presented with information and choices online (known as 'online choice architecture' or 'dark patterns').
What has happened?
- Wowcher has signed undertakings with the CMA committing to change its sales practices to avoid misleading or unfairly pressuring consumers into making quick purchases. As part of these undertakings, it will refund over 870,000 customers who were signed up to its 'VIP membership' via a pre-ticked box (possibly leading to over £4 million in refunds).
- Separately, Simba Sleep has signed undertakings with the CMA agreeing to change its online sales practices, including ensuring that it makes genuine discount claims and that any countdown clocks used on its websites are clear.
- The undertakings are a useful guide to how the CMA will approach the issue of online choice architecture and what expectations it has of businesses. Claims must not be misleading or pressure consumers: claims such as 'Almost gone – only 2 remaining' must reflect actual remaining stock levels; 'was' prices must be genuine and a sufficient volume of the product sold at that price before it is used.
- The investigations are part of a wider initiative by the CMA and other regulators to tackle online choice architecture. In March 2023, the CMA published an open letter to online businesses indicating that it was actively focusing on this area and encouraging businesses to urgently review their practices to ensure compliance with consumer law.
- Getting this right will be key for business given that the CMA will soon have new powers to issue direct fines to businesses of up to 10% of their annual global turnover for non-compliance with consumer law, without the need to apply to court. While the focus so far has been on urgency and price reduction claims, the CMA has said that it intends to broaden out its work in this area in 2024/25 to other aspects of online choice architecture.
Want to know more?
The legislation
The key piece of consumer protection legislation relevant to the CMA's work is the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). The CPRs contain a general prohibition against unfair commercial practices and specific prohibitions against misleading actions and misleading omissions.
Wowcher
The CMA launched an investigation in March 2023 following concerns that Wowcher's countdown timers and marketing claims were creating a false sense of urgency for customers and were influencing how people make purchasing decisions. The CMA's main concern was that urgency claims, particularly when used with countdown timers, can have the effect of pressuring shoppers to buy quickly for fear of missing out. The CMA was particularly concerned that many products on Wowcher's website continued to be available at a similar price once the countdown timer had ended. The CMA was also concerned about Wowcher's use of pre-ticked boxes to sign customers up to its paid-for 'VIP membership'.
The CMA wrote to Wowcher in November 2023 setting out its concerns and demanding that the company change its practices or otherwise risk court action for breach of the CPR. As a result, Wowcher has signed undertakings committing to:
- Only use clear and accurate countdown timers. They must not mislead consumers or give false impressions as to the urgency.
- Make sure all marketing claims are clear and accurate. Claims such as 'Almost gone – only 2 remaining!' must reflect the actual remaining stock levels. Claims such as 'In high demand!' must reflect actual sales figures.
- Refund customers who signed up to 'VIP membership' via a pre-ticked box. This will affect over 870,000 customers and result in refunds totalling over £4 million.
Simba Sleep
The CMA also launched an investigation against Simba Sleep in December 2023, raising similar concerns about the business misleading customers about price reductions and putting pressure on them to make quick purchases in contravention of the CPR. Simba Sleep has now signed undertakings committing to:
- Use genuine discount claims. 'Was' prices must be genuine and they must sell a sufficient volume of the product at the price before using it as a 'was' price.
- Ensure countdown clocks are clear. This includes specifying prominently which products they apply to and not giving consumers a false impress that they must act quickly if that is not the case.
What does this mean for you?
- It has been clear for some time that online choice architecture is a key area of focus for a number of regulators, including the CMA, Advertising Standards Authority (ASA) and Information Commissioner's Office (ICO). In fact, the CMA investigations into Wowcher, Simba Sleep and Emma Sleep all followed adverse ASA rulings against these businesses indicating that the CMA will step in if businesses fail to alter their practices following adverse ASA rulings.
- While the CMA currently has to apply to court to enforce the CPRs, that will all change soon. The Digital Markets, Competition and Consumers Act 2024 (DMCCA) will give new powers to the CMA, including the power to determine whether there has been an infringement of consumer law and - where there has been an infringement - to issue direct fines of up to 10% of a businesses' annual global turnover. We can expect to see more investigations into online choice architecture from the CMA as a result. More from the CMA on this in our guest post here.
- We can also expect to see the CMA widen its area of focus. So far, it has largely concentrated on urgency and price reductions claims but it is clear from its Annual Plan for 2024/25 that it intends to broaden its focus to areas such as drip pricing, subscription traps and fake reviews – all areas which are strengthened under the DMCCA. With the ICO also considering the data protection angles of online choice architecture, there is increasing need for businesses to ensure compliance with relevant laws and Codes.
