The taskforce continues to receive and monitor complaints about unfair practices in relation to cancellations and refunds and potentially unjustifiable price rises.
By John D. Colahan and Anuj Ghai
On 21 May, the CMA released a further update setting out the work of its COVID-19 Taskforce in responding to complaints regarding competition and consumer protection problems arising from the novel coronavirus and measures taken to contain it. This follows a 30 April report (summarised here) which set out the programme of work the CMA intended to undertake to deal with complaints about unfair practices in relation to cancellations and refunds.
Based on the complaints received and additional information received from consumer bodies, such as Which? and Citizens Advice, the CMA’s principal concerns continue to relate to unfair practices in relation to cancellations and refunds and unjustifiable price increases, particularly for essential goods. The CMA notes that from 10 March to 17 May it was contacted more than 60,000 times about coronavirus-related issues; further, the rate at which consumers are contacting the CMA has increased in recent weeks suggesting that problems continue to persist.
Unfair practices in relation to cancellations and refunds
Consistent with its earlier updates and with its recently published statement on consumer protection law in relation to cancellations, the CMA has indicated that it expects businesses to offer consumers a full refund when no service is provided, including if a consumer is required to cancel a service or is prevented from receiving any service, because of restrictions that apply during the lockdown.
The CMA notes that since mid-April, the vast majority of complaints received by the CMA have been about unfair practices in relation to cancellations and refunds.
Specifically, consumers have raised concerns about firms refusing to:
- Provide refunds
- Introducing unnecessary complexity into the process of obtaining refunds
- Charging high administration or cancellation fees
- Pressuring consumers into accepting vouchers instead of cash refunds
Most cancellation complaints relate to holidays and air travel. With the summer holiday season fast approaching, the CMA considers that the potential harm to consumers from companies failing to respect consumers’ cancellation rights is set to grow.
In its 30 April update, the CMA indicated that it would prioritise weddings and private events, holiday accommodation, and nurseries and childcare providers in its investigation. However, based on the number and nature of complaints being received, package holidays has also now been included in the CMA’s scope of investigation. Complaints relating to airlines, which represent around a fifth of all cancellation complaints received, have been conveyed to the Civil Aviation Authority, which has primary responsibility for the enforcement of consumer protection law as it applies to air travel.
Unjustifiable price increases, particularly for essential goods
Whilst the volume of price-related contacts received by the CMA has declined since early April, the CMA considers that the coronavirus outbreak coupled with the restrictions on businesses and people, mean that there continue to be significant risks that prices could be raised above justifiable levels in a number of sectors.
The CMA continues to investigate complaints of unjustifiable price rises and has thus far written to 264 traders. The CMA continues to collect additional evidence, including about price rises further up the supply chain. As before, the CMA has indicated that where there is evidence that consumer protection law has been broken, the CMA will not hesitate to take enforcement action if warranted. Whilst the CMA can also take action against potentially unjustifiable price rises under competition law, its powers here are far more limited and only apply with respect to dominant companies. The CMA can also take action against potentially unjustifiable price rises under competition law though in practice this is much more difficult to establish. The CMA has noted that its Taskforce continues consider potential enforcement cases against companies suspected of raising prices for essential items to unjustifiable levels.
CMA’s response to principal concerns
The CMA has a wide range of options at its disposal to tackle harmful practices. For example, it can seek further information from businesses; it can issue them advisory or warning letters; it can work with enforcement partners, consumer bodies, and trade associations; where appropriate, it 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. The CMA will act under its consumer protection powers, rather than under competition law, to deal with unfair practices relating to cancellations and refunds.
CMA’s response to cancellations and refunds
The CMA has responded to complaints regarding cancellations and refunds by issuing guidance to businesses and consumers; launching investigations; and working with other enforcers of consumer law. As regards guidance, on 30 April the CMA published a statement setting out its views on how the law operates in respect of cancellations and refunds, which we summarised in our earlier update. In terms of investigations, the CMA has prioritised the following four sectors for investigations:
- Weddings and private events. The CMA has indicated that practices of concern include venues refusing to refund any money and telling people to claim on their insurance.
- Holiday accommodation. The CMA is particularly concerned with complaints that traders are pressuring consumers into accepting vouchers instead of refunds.
- Package holidays. Practices of concern include traders refusing refund requests and/or making it very difficult for consumers to obtain refunds by, for example, insisting that consumers rebook or accept vouchers.
- Nurseries and childcare provision. The CMA has indicated that practices of concern include asking people to pay very high sums to keep places open for children while nurseries remain closed.
The CMA has now opened a number of cases in respect of certain companies operating in these sectors. The CMA will provide an update on its work here in due course. The CMA is also working with other enforces of consumer protection law to deal with issues relating to cancellations and refunds. For example, the CMA has redirected a number of complaints to the Civil Aviation Authority and a smaller number of complaints to Ofcom and the FCA.
CMA’s response to unjustifiable price rises
As of 17 May, the CMA has written to 264 individual traders asking for more information, or expressing concern about unjustifiable price increases. The CMA has warned that traders would be well advised to heed its warnings given the possibility of enforcement action and the adverse reputational consequences of being perceived by customers as exploitative. To date, the CMA has received 150 responses from the businesses to which they have written. Many traders attribute high prices to higher costs charged by suppliers, although according to the CMA, this does not adequately explain prices that are far in excess of the average. The CMA’s Taskforce is seeking further evidence of claims about supplier pricing practices.
The CMA has indicated that it is prepared to use its competition and consumer protection powers to their fullest extent to tackle unjustifiable price increases. The CMA has also advised the government on legislative changes that would enable a faster and more robust response to the problem of unjustifiable price rises.
The CMA notes that many complaints about unjustifiable price rises relate to listings placed on online platforms. Accordingly, the CMA wrote to online e-commerce platforms in March and have continued to draw the platforms’ attention to complaints about listings charging unjustifiable prices for essential goods. The CMA has indicated that it expects retail platforms to take steps to prevent such listings appearing in the first place; for them to be identified and removed quickly when they do appear; and for the accounts of unscrupulous sellers to be blocked or terminated.
Finally, the CMA has also written to a number of trade associations and published an open letter to the pharmaceutical and food and drink industries summarising its concerns and setting out its expectations of how traders should behave.
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