Who: Which? the Competition and Markets Authority (the “CMA”) and the UK supermarket industry
When: 21 April 2015 – with a response due from the CMA by mid to late July 2015
Law stated as at: 14 May 2015
On 21 April 2014, the CMA announced it had received a super-complaint from Which? concerning alleged misleading and unclear (or as they refer to it “opaque”) pricing practices in the groceries sector. You can read the super-complaint here.
A “super-complaint” is a complaint which may be made by a consumer body, which is designated under section 11 of the Enterprise Act 2002 to make a complaint to the CMA explaining how any feature or combination of features of a market in the UK for goods or services may be significantly harming the interests of consumers.
Super-complaints are rarely used, reportedly just 14 times since their introduction over 10 years ago. The most famous instance to date was the super-complaint made by Citizens Advice in 2005 in respect of PPI mis-selling.
The CMA has 90 days to respond to the super-complaint, and in that response must state what, if any, action it proposes to take.
Why this matters:
Which? alleges that over the past seven years supermarkets have promoted a range of misleading and confusing pricing tactics – such as multi-buy offers that are less cost-effective than purchases of individual products, shrinking product size but same price and offers exaggerating discounts. Which? claims that the impact on consumers is that they are under the impression they are getting a bargain when actually, that bargain does not exist. In short, manipulating consumer spending by misleading people into choosing supposedly promoted products. Which? thinks that this means that consumers could be “collectively losing out to the tune of hundreds of millions of pounds”.
The particular pricing practices that Which? has identified and wants the CMA to investigate are:
- confusing and misleading special offers that make extensive use of price framing, including reference pricing, volume offers and free offers;
- a lack of easily comparable prices due to the way unit pricing is undertaken; and
- shrinking pack sizes without any corresponding price reduction.
These actions, if they do exist, would likely breach the Consumer Protection from Unfair Trading Regulations 2008 (the “Regulations”). These are the Regulations which prevent traders from using unfair commercial practices which stop consumers from making free and properly informed decisions when purchasing consumer products – a commercial practice is misleading if “it or its overall presentation in any way deceives or is likely to deceive the average consumer”. A breach of the Regulations can be very serious, leading to potentially significant financial penalties for guilty parties. In addition, any finding of fault under the Regulations, whilst it does not automatically give rise to a private cause of action for a consumer, could nevertheless pave the way for follow-on damages claims.
The CMA now has 90 days to publish a response stating whether or not it will take action, and if it does decide to act, what that action will be. The CMA will be taking evidence from interested third parties.
In terms of the possible action the CMA could take, they could decide to take no action, or simply issue revised guidance for supermarkets to comply with. Alternatively, they could take more serious steps such as instigating a market study or a full market investigation or even take competition or consumer enforcement action against individual companies.
Although this comes at a very busy time for the CMA’s consumer protection team, they are currently handling a large market study into online reviews and endorsements, we still anticipate the CMA will take some form of action. At the very least we anticipate a market study will take place. Investigations into breaches of the Regulations which concern pricing practices and consumer detriment have been a hot topic for the CMA and their predecessor the OFT – in particular the OFT’s investigation into misleading reference pricing by furniture and carpet businesses which concluded last year. In addition, cases like the Tesco “half price” strawberries claim flag that courts are keen to take action where consumer harm is established.