The CMA is concerned that businesses may be engaging in unfair practices in relation to cancellations and refunds, and unjustifiable price increases.
On 24 April 2020, the Competition and Markets Authority (CMA) published an update on the work of its COVID-19 Taskforce (the Taskforce) (the Update Report). Shortly after establishing the Taskforce, the CMA launched an online service to allow businesses and consumers to report “unfair practices” related to COVID-19. The Update Report summarises the nature and volume of complaints that the CMA has received so far and the actions it has taken in response. The CMA intends to publish additional reports while unfair practices related to COVID-19 persist.
The CMA notes that whilst the majority of businesses are behaving responsibly and fairly during this crisis, it is concerned that a small minority of businesses may be exploiting conditions. For example, it highlights misleading claims about goods or services, charging excessive prices, or ignoring customers’ cancellations and other rights. The CMA’s assessment of business conduct is based on monitoring and analysis of complaints received by email and through its recently launched online service. Further, consumer bodies such as Which? and Citizens Advice, have also passed on their concerns to the CMA. Based on the information received, the CMA’s principal concerns currently relate to (i) unfair practices in relation to cancellations and refunds and (ii) unjustifiable price increases, especially for essential goods.
Unfair practices in relation to cancellations and refunds
The Update Report notes that disruptions to travel as a result of COVID-19 have required many consumers to cancel holidays, travel, and other plans. The CMA is concerned that businesses are refusing refunds in these circumstances, or are otherwise introducing unnecessary complexity into the refund process. Further, the CMA expresses concern with businesses charging high administration or cancellation fees and/or compelling consumers to accept vouchers instead of cash refunds.
The CMA’s complaints data indicate that a growing proportion, around four out of five complaints, relate to cancellations and refunds. Any action that the CMA takes to tackle the problem of unfair practices in relation to cancellations and refunds will be under its consumer protection powers rather than under its competition law powers.
Unjustifiable price increases, particularly for essential goods
The Update Report clarifies that the volume of price-related complaints the CMA has received has declined in recent weeks. However, it remains concerned that the situation caused by COVID-19 “continue[s] to present significant risks that prices are raised above justifiable levels in a number of sectors”.
The CMA is currently investigating complaints of unjustifiable price rises, and is taking steps to prevent them, including by writing to 187 traders that have collectively been the subject of over 2,500 complaints. The CMA is also collecting further evidence, including about price rises further up the supply chain. The largest reported price increases concern hand sanitiser, with a reported median rise of 367%.
The CMA notes it will not hesitate to take enforcement action if warranted and where there is evidence that competition or consumer protection law has been broken.
The CMA’s plans to tackle harmful practices
The CMA can employ a range of measures to tackle the problem of harmful practices. For example, it can seek additional information from businesses and/or issue advisory or warning letters. It can also work closely with its enforcement partners, consumer bodies, and trade associations. Additionally, and where appropriate, the CMA can take enforcement action under its competition and consumer protection law powers; and it can advise government, including on any emergency legislative changes that might be required.
With respect to cancellations and refunds, the Taskforce continues to monitor these practices and will announce next steps this week. Any steps taken by the CMA to combat the problem of cancellations and refunds will be under its consumer protection powers rather than through competition law.
As regards price increases, the Taskforce has responded to complaints about unjustifiable price increases by:
- Setting out its expectations to industry and trade bodies
- Engaging with online retail platforms such as Amazon and eBay to ensure that listings that charge unjustifiable prices for essential goods are removed quickly and that accounts of “unscrupulous sellers” are suspended or terminated
- Writing to businesses seeking additional information or to express concern about unjustifiable price rises
The Taskforce is also looking at allegations that many price increases are the result of higher costs charged by suppliers. The CMA encourages businesses experiencing large price rises or other unfair practices from their suppliers to report this through the CMA’s online form.
The Update Report indicates that the Taskforce will continue to monitor complaints about price rises in the coming weeks and will be prepared to take enforcement action if there is evidence that competition or consumer protection law may have been broken.
The CMA can employ a wide range of measures under both its consumer protection and competition law powers to tackle the problem of “unfair practices” related to COVID-19. The Taskforce appears to be monitoring complaints closely and so businesses should consider seeking legal advice prior to implementing any significant price rises and/or tightening its cancellation and refunds policy.