A wake up call for online retailers as CMA tackles misleading choice architecture
In a joint position paper of August 2023, the Competition and Markets Authority (CMA) and Information Commissioner’s Office considered how the manner in which companies present information and choices to their websites’ online customers (Online Choice Architecture or OCA) may mislead customers and undermine consumer choice. Since then, the CMA has initiated a number of investigations in respect of such online choice architecture against online retailers.
Online Choice Architecture
When OCA practices are used incorrectly, it can not only influence consumer decisions and behaviour but can also remove consumers’ control over how their personal data is collected, used and shared. As a result, consumers are guided towards decisions, based on personalised online experiences, that they may not have otherwise made.
As part of its recent enforcement work focused on tackling misleading OCA practices, the CMA launched investigations against mattress companies Emma Group and Simba Sleep. The investigations have looked closely at ‘urgency claims’ and ‘price reduction claims’ tactics employed by these mattress companies.
Urgency claims
There are various types of urgency claims:
- Time pressure claims: where websites display countdown clocks or make statements such as “offer ends on X date” to create the impression that an offer is only available for a limited time.
- Popularity claims: where websites make claims such as “X number of people have viewed this item in the last X hours”.
- Shortage claims: where websites make claims such as “limited stock available”.
Price reduction claims
Price reduction or discount claims use claims of a discount or special offer price by reference to a higher comparison price. When used improperly, the use of phrases such as “was £X, now £X” creates an impression that substantial savings are to be made.
Emma
In October 2024, the CMA launched legal action against mattress company Emma. According to the CMA, Emma employed countdown clocks and made incorrect claims about discounts ending which were used in a misleading manner and influenced consumers’ decision making. The CMA had previously investigated Emma’s use of discount and urgency claims and requested that Emma make changes to its conduct. When Emma failed to take the requisite action to rectify its conduct and address the CMA’s concerns, it commenced legal action. Despite the fact that legal proceedings have begun, the CMA will allow Emma to agree to an order or provide undertakings to change its conduct prior to the case being heard.
Simba Sleep
The CMA initiated an investigation in December 2023 against mattress company Simba Sleep to explore whether it had misled consumers about price reductions through various pressure selling tactics. Following numerous complaints regarding Simba Sleep’s online sales behaviour, the CMA investigated Simba Sleep’s use of countdown timers and its potential to mislead consumers into making snap purchases.
In a positive outcome for consumers, Simba Sleep agreed in July 2024 to comply with an agreed set of rules around the use of discount claims and urgency claims. In particular, Simba Sleep agreed to the following undertakings to ensure its discount claims were genuine:
- Simba Sleep was required to sell a sufficient volume of products at a certain price for an adequate amount of time before advertising a discount and the ‘was’ price, in order for that previous price to be genuine.
- Simba Sleep also agreed to utilise countdown clocks in a clear manner that does not give consumers the false impression that they must make a snap decision.
- Simba Sleep was required to provide a report to the CMA to demonstrate its compliance within six months of signing the undertakings.
Other OCA claims
The CMA has previously also examined OCA practices in a number of antitrust cases including in respect of hotel bookings, car rental websites, and online gambling. OCA was also relevant to the CMA’s decision in August 2024 to reject commitments offered by Google in respect of the CMA’s investigation into Google Play’s billing system for in-app purchases. In that case, the CMA noted concerns that the resulting interstitial screens (or pop-ups) with alternative billing options “may create unnecessary friction and/or present information in an unduly negative/misleading manner for users” and thereby undermine their viability.
Takeaway
Under the Digital Markets, Competition and Consumers Act 2025, the CMA will have expanded powers to directly enforce consumer protection laws without the need to initiate court proceedings. Where the CMA finds that the law has been broken, it will be able to issue fines of up to 10% of the infringing business’ annual worldwide turnover. These new consumer rights enforcement powers are expected to commence in April 2025.
The CMA’s recent investigations demonstrate that it is serious about enforcing action against firms who engage in misleading OCA. This commitment was repeated in the CMA’s draft annual plan for 2025/2026, in which it noted as a medium-term priority over the coming three years its goal of enabling people to make their own choices, without being misled or put under pressure.
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Footnotes
Joint position paper of August 2023