CMA takes court action against Emma Group for misleading consumers

On 25 October 2024 the CMA announced that it has started court proceedings against mattress company Emma Group (Emma) for failure to address the CMA's concerns over misleading online sales practices.  This follows the CMA's initial investigation into Emma's compliance with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) over concerns that its urgency claims, high demand claims and discounts were misleading consumers.

The CMA's Online Choice Architecture programme

The investigation is part of a programme of consumer enforcement work by the CMA focused on Online Choice Architecture (see our briefing here), which aims to tackle harmful online selling practices, including pressure selling tactics such as urgent time limited claims and exaggerated discount offers for which the real price reduction may not be as great as is claimed.

In July 2023 the CMA wrote to Emma, outlining its concerns that very few advertised Emma products were actually sold at their full price, so the discounts being offered were not genuine. Emma's claims relating to when the sales were ending were also misleading, as new sales would often start soon after the advertised end-date.  The CMA also set out its concerns that the company’s use of countdown timers and claims of high demand for certain products could mislead consumers, and therefore breach consumer protection law. In August 2024 the CMA issued Guidance on discounts and reference pricing principles for sales of mattresses online (Guidance).

Emma adjusted the use of its countdowns and ended the urgency claims when the issue was first raised by the CMA, but it is challenging the CMA's approach to discounts and reference pricing as set out in the Guidance.

Genuine price advantage

Under the CMA's Guidance, where a trader chooses to use a reference price when advertising discounts, any comparison between the reference price and the discounted price must reflect a genuine price advantage.

The CMA makes it clear that whether a price comparison is genuine depends on:

• The duration of an offer: the 'was' price must be offered for a sufficient period of time on the same website, immediately before the discount begins. That duration cannot be shorter than that of the discounted offer (the duration requirement).
• The volume of an offer: a sufficient number of sales should have been made at the 'was' price.  At least one product should have been sold at the 'was' price for every two products sold at the discounted price (the volume requirement).

Emma argues that the CMA's volume requirement in the Guidance, under which it is required to limit the number of products sold at a discount, goes beyond the requirement set out in the legislation that a price advantage claimed by a trader must not be misleading or unfair, and harms consumers by denying them access to popular deals. Emma still has the opportunity to amend its practices by giving undertakings to the Court before the case is heard, but it claims that it is already complying with the relevant consumer legislation and has refused to settle with the CMA on this point.

Impact of the DMCC Act on the CMA's enforcement powers

The CMA is currently unable to enforce alleged infringements of consumer protection legislation directly and has to apply to the High Court for an enforcement order in order to secure enforcement.  If the Court finds that Emma's discount policy infringes consumer protection legislation it can order Emma to stop engaging in the conduct in question and failure to comply with a Court order will be treated as contempt of court and can result in a fine or imprisonment.

Once the consumer protection provisions in Part 3 of the Digital Markets, Competition and Consumers Act (DMCC Act) take effect, which is expected to be in April 2025, the CMA will be able to take direct enforcement action for breaches of consumer protection law in the same way it currently does for breaches of competition law. This includes the power to impose fines of up to 10% of global turnover of the companies involved where the CMA concludes that conduct is in breach of the relevant consumer protection legislation.

CJEU approach to the calculation of price reductions

It is worth noting that in a recent judgment relating to Aldi's discount practices the Court of Justice of the EU (CJEU), clarifying how price reductions must be calculated by reference to the prior price, only refers to a duration requirement and not a volume requirement (see our briefing here). 

The UK's CPRs, which are abolished under the DMCC Act, are now included as primary legislation in the DMCC Act and have been updated to meet UK needs. They are based on the same EU Directives but as they have now become UK primary legislation the UK courts are free to interpret that legislation without taking into account the EU caselaw.