CMA launches court action against Emma Mattress.
The Competition and Markets Authority (CMA) is taking mattress retailer Emma to court after it failed to address all of the CMA's concerns about misleading online sales practices and compliance with consumer protection law.1 In particular, the CMA is concerned about urgency tactics and price reduction claims employed in Emma's online sales practices, such as showing big discounts (when the real price reduction might not be as much as claimed) and countdown clocks being used to generate FOMO (fear of missing out), which may mislead consumers by putting pressure on shoppers to make quick buys and spend more than they otherwise would have done.
Following an investigation, the CMA wrote to Emma on 24 July 2023 setting out the detail of its concerns and sought a formal commitment (called undertakings) from Emma, to change its online sales practices to ensure compliance with consumer protection law. On 29 May 2024, the CMA then notified Emma that unless it committed to making changes to its practices the CMA would launch court action to protect UK consumers. On 25 October 2024, having failed to address the CMA's concerns, the CMA issued court proceedings.2
What does the law say?
UK consumer protection law contains rules that exist to protect consumers against commercial practices which are misleading or unfair. Urgency tactics and price reduction claims (and the use of reference pricing) are types of online sales practice which risk infringing consumer law where they mislead or put unfair pressure on the consumer and distort their purchasing behaviour. Reference pricing is a price promotion where the current selling price is compared favourably with a different, higher price (e.g. comparisons with a price that was previously charged or will be charged in the future or is described as the RRP), with the general principle being that in order for reference pricing to not be misleading, it must be a 'genuine' reduction in price taking into account both duration and volume of an offer.3
Some other general examples of online sales practices which may risk breaching consumer protection law include where:
- A seller's website tells a consumer that a deal ends today at midnight and shows a countdown clock, but the deal, in fact, continues beyond midnight. This may be unlawful if the seller's claims are untrue and it places unfair pressure on the consumer to act quickly and make a purchase when there is no reason to rush given the deal does not expire when stated.
- A seller's website tells a consumer that a deal ends today at midnight and shows a countdown clock, and, yes, this particular deal does end at midnight, but a new deal is offered following this which is substantially the same. This may be unlawful if the seller's claims are misleading – although it's true that the deal ends at midnight there is a comparable offer available after the stated time, and so the consumer may be deceived into thinking they need to act fast to secure the promotional price.
- A seller's website shows a prompt saying X number of people are looking at the product and an urgency claim is made, for example, a pop up box appears saying 'hurry' or 'selling fast'. Although it may be true that X number of people are looking at a product, the seller's claims may be misleading where they create the impression that the consumer needs to complete their purchase quickly to avoid missing out.
The CMA is monitoring sales practices across the sector and, so, the court action against Emma forms part of an ongoing programme of consumer enforcement work focused on 'Online Choice Architecture' (how the design of online environments impacts consumers decision making and actions) aimed at tackling those sales practices which are potentially harmful, such as urgency tactics. The CMA has already secured formal changes to the business practices of Simba Sleep Limited, including an agreed set of rules around the use of discount claims and urgency claims, such as ensuring that any 'was' price is genuine (i.e. that sufficient volume was sold at that price before referring to it as a 'was' price) and using clear and accurate countdown clocks (they must not give consumers a false impression that they have to act fast to avoid missing out).4
What are the consequences of failure to comply with consumer protection law?
Failure to comply with consumer protection law may result in:
- The CMA taking enforcement action in court to prevent unlawful sales practices – this includes both criminal prosecution and civil enforcement. The CMA's new power of direct enforcement in the Digital Markets, Competition and Consumers Act 2024 i.e. to decide for itself whether consumer law has been broken rather than go through the courts – is expected to come into effect in April 2025. Where the CMA decides that there has been a breach, it will be able to impose fines of up to 10% of global annual turnover on businesses. Firms will be able to appeal the CMA's decision to the courts.
- Customers may make a claim against the trader in court.
- Reputational harm for a trader named publicly in an enforcement case.
In the case of Emma, the CMA has stated that there is still has an opportunity for Emma to consent to an order or give the necessary undertakings to the court before the case is heard in court. Perhaps rather aptly (or not) the countdown is on...
Footnotes
1. CMA launches court action against Emma to protect UK consumers – GOV.UK. The CMA's court proceedings involve Emma Sleep GmbH, Emma Matratzen GmbH and Emma Sleep UK Limited ('Emma').
2. Emma Group: consumer protection case – GOV.UK
3. Discount and reference pricing principles: selling mattresses online – published by the CMA on 1 August 2024.
4. Simba Sleep Limited: consumer protection case – GOV.UK
Originally published October 29, 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.