We consider the recent announcement by the CMA on how it will exercise its new powers of direct enforcement in the short term including in relation to fake reviews and drip pricing, as well as how the CMA will approach enforcement generally.

What's the development?

• The Digital Markets, Competition and Consumers Act (DMCCA) introduces new rules for unfair commercial practices, replacing and updating the Consumer Protection from Unfair Trading Regulations 2008 (CPUTRs) with effect from 6 April 2025.  More on the DMCCA generally here.

• As well as introducing enhanced provisions around fake reviews, drip pricing and subscription contracts, the DMCCA confers new powers on the regulator, the Competition and Markets Authority (CMA).

• The CMA will now have power to investigate and determine whether there has been  a breach of the rules and – where there has - to impose fines (of up to £300k or 10% of a trader's annual worldwide turnover, whichever higher) and other sanctions, without the need to go to court.

• In the Q3 2024 edition of Advertising Quarterly, we shared an article by Jason Freeman, Director, CMA, outlining the CMA's new powers of direct enforcement and how the CMA intends to use them. 

• Since then, there have been a number of developments which have helped to clarify the CMA's areas of focus and approach to enforcement at least in the short term. We look at these developments and predict what's on the CMA's radar. 

What has the CMA recently said about enforcement? 

The CMA has recently announced how it will exercise its new powers of direct enforcement in the short term, particularly in relation to the enhanced provisions in the DMCCA around fake reviews and drip pricing. It has said that:

• Drip pricing. It will take a phased approach as regards drip pricing, producing finalised guidance as regards clearly unlawful drip pricing by 6 April 2025 and re-consulting on those aspects of the guidance that have created uncertainty (such as pricing for fixed term periodic contracts) in the summer.  In the meantime, it will  only take enforcement action against the former. For what that means and our recommendations, see here.

• Fake reviews. The CMA says that it recognises the need for the enhanced provisions around fake reviews to bed in and so will focus its efforts on supporting compliance, as opposed to enforcement, for the first three months following commencement. More on that here.

• Everything else. Although the remaining law where the CMA's new direct enforcement powers can be used hasn’t changed materially, the CMA recognises the risks for businesses of getting things wrong are substantially increasing. It therefore says that its early enforcement action following commencement of the DMCCA is likely to focus on more egregious breaches such as (a) providing information to consumers that is objectively false, (b) behaviour where the CMA has already put down a clear marker through its previous enforcement work and (c) practices that the law considers in all circumstances to be unfair (more on those and how they are changing here).

This is useful guidance and suggests that at least a short period of time will be given for businesses to ensure compliance with the new provisions on fake reviews, and that the short term focus will be on serious breaches.

What other information will the CMA publish?

The CMA has also said that, by 6 April 2025, it will publish three documents:

• A new approach document setting out its enforcement priorities for the first 12 months of the new regime, as well as how it will implement the Strategic Steer (the government's priorities and expectations for the CMA) and the ‘4Ps’ (the CMA's ways of working). This should provide additional clarity on likely areas of focus and we will report more when it is published.

• Revised consumer protection regime guidance (CMA58) setting out how the direct enforcement regime sits in the broader enforcement regime. This is likely to cover when the CMA will exercise its new powers of direct enforcement (likely, most of the time) and when it will continue to use its powers to bring civil and criminal enforcement though the courts. It will sit alongside the CMA's enforcement guidance (CMA200) which has already been finalised and which sets out the processes that the CMA will adopt when it takes direct enforcement action. 

• A streamlined and simplified version of the unfair commercial practices guidance (CMA207) on which the CMA previously consulted (carving out areas of drip pricing on which it will re-consult). It's not yet clear how the finalised guidance will compare to the draft but it seems unlikely that it which change much in substance (except in relation to drip pricing), not least because most unfair commercial practices have not changed materially under the DMCCA.

Of these, the approach document is likely to be the most instructive in terms of the CMA's areas of focus. 

What practices and sectors will the CMA focus on?

A sense of what else the CMA might focus on can be gleaned from its draft annual plan for 2025-26 and other documents. These suggests that:

• Like last year, the CMA will broaden its work on problematic online choice architecture. This could mean more work on price reduction claims (was/now pricing) and urgency claims (scarcity, popularity, act fast or time limited claims) – practices on which the CMA has already put down a marker and on which the ASA continues to be engaged.  

• Tackling fake reviews will be near the top of the CMA's action list, following the bedding in period for the enhanced rules, as will tackling clearly unlawful drip pricing. 

• In time, other types of drip pricing and subscription contracts will come under the spotlight (more here). 

• Work will continue on other pricing practices such as dynamic pricing and unitary pricing.

• Sectors such as travel, housing, online entertainment and those where the CMA has already set expectations (such as unregulated legal services and trader recommendation sites) will be under the spotlight.

• We might also see further work in relation to green claims.

How generally does the CMA decide its priorities?

The CMA prioritises its work largely based on its prioritisation principles (CMA188). These principles include the likely impact, strategic significance, likelihood of success, and resource implications of action, with a focus on cases where there are systemic market problems or significant unfair treatment of consumers. 

Where there are systemic market failures, the CMA will focus on areas where there is the possibility of achieving market-wide impact by setting a behavioural or legal precedent, or where there is a strong need for deterrence or compensation. From past experience, we know that this is likely to mean the CMA focusing on particular problematic practices (across several sectors) or particular sectors (where there might be one or more problematic practices). 

In practice, a variety of factors go 'into the pot' for determining priorities, including whether particular businesses have complied with adverse rulings by other regulators (such as the ASA), what complaints the CMA or other enforcers have received, the outcome of market research (such as the Consumer Detriment Survey, to be published again in the spring) and what's going on in the market.

What else might change?

Enforcement actions might proceed more quickly given the CMA's new powers, as well as its duty of expedition and the emphasis on pace (one of the ‘4Ps’). We are also likely to see greater imposition of financial penalties on businesses for infringements of the DMCCA (as set out in the enforcement guidance (CMA200)) and possibly less reliance by the CMA on undertakings to settle cases.

What does this mean for you?

• Businesses should be familiar with their new obligations in the DMCCA including those concerning drip pricing, fake reviews and (in time) subscriptions contracts. More generally, they should be familiar with all of their consumer protection obligations. Reviewing guidance and monitoring ASA rulings can assist with understanding compliance obligations.

• Having appropriate policies in place, auding and refining practices, training staff and embedding compliance by design are all highlighted as being important in the CMA's enforcement guidance (CMA200). 

• Businesses should watch for developments including the publication of the new approach document and finalised version of the unfair commercial practices guidance (CMA207). Some may also want to input into the second consultation on drip pricing, planned for summer 2025.