UK CMA provides further guidance on the 'drip pricing' provisions of the DMCCA

The Competition and Markets Authority (CMA) is consulting on draft guidance on the price transparency provisions of the Digital Markets, Competition and Consumers Act 2024 (DMCCA) in respect of invitations to purchase. The consultation is open until 8 September. The new draft guidance follows the CMA's final guidance on the unfair commercial practices (UCP) regime of the DMCCA, published in early April this year and the CMA's statement that it would be taking a "phased approach" to the so-called "drip pricing" aspects of the new UCP guidance.

The new draft guidance provides numerous examples both of prohibited "drip pricing" practices, as well as ways to ensure compliance when presenting price information in an invitation to purchase. While many of the examples of what the CMA considers to be prohibited drip pricing are expected and straightforward, some of them are more nuanced. Businesses will, therefore, need to review the guidance carefully. 

Total price requirements

The guidance provides additional information on when "fees, taxes, charges or other payments" will be considered "mandatory" and must, therefore, be included in a headline price, as opposed to "optional", in which case they can be displayed separately to the headline price.

It also provides clarification on what to do if it is not possible to calculate the total price in advance due to, for example, the nature of the product. Generally, traders must provide consumers with the necessary information to calculate the total price themselves and any information about additional charges must be presented as prominently as the headline price.

The guidance introduces the new concept of "partitioned pricing", which is the practice of presenting the total price of a product as a breakdown of the price and any mandatory fees and charges, without adding them together to show the consumer one, overall total. It also confirms that this will not be sufficient to meet the total price requirements under the DMCCA.

Delivery charges

The guidance clarifies that delivery charges will be mandatory if the consumer cannot purchase the product without paying an additional charge to cover the cost of delivery. Delivery charges will be optional if the consumer can purchase and receive the product without having to pay for delivery (for example, by collecting the product in-store for free). Delivery charges will not be considered optional just because there is a choice between several different paid delivery options, such as standard, next day or express delivery.

To comply with the total price requirements, mandatory delivery charges must be included in the headline price. For example, in an online ad for a standalone product, the headline price must be the cost of the product plus the mandatory delivery charge – and presented as one, overall price. Where there are different delivery options, the minimum delivery price must be included in the headline price and, if the consumer decides to choose a more expensive delivery option, this must be reflected in the headline price at the next stage in the consumer transaction journey.

If traders choose to waive or reduce the delivery charge if the consumer spends a certain amount, the draft guidance clarifies that this does not mean that the cost of delivery is not reasonably calculable in advance. The trader must include the full delivery charge in the total price until the consumer's basket reaches the price that qualifies for a lower or free delivery charge.

Transaction charges

The draft guidance attempts to address concerns raised in an earlier consultation by online retailers, who allow multiple products to be selected and purchased together and who may levy one or more different pre-transaction charges, by recognising that it may not be realistic or meaningful to include all of these charges in the headline price of each product. In such instances, the draft guidance suggests various practical solutions to achieve compliance, for example:

• A prominent "floating basket" that stays on the screen and updates in real-time, keeping the total price visible to the consumer at all times.
• A dynamic "add to basket" button on the product page that shows what the cost of adding an item to the basket will be, including any additional fees or discounts that will apply to the purchase.
• Automatically displaying the consumer's "basket" with the total price (including all mandatory charges) based on the products currently selected after each product is selected (for example, via a pop-up or new webpage).

Fixed-term periodic charges

The draft guidance sets out how the total price should be displayed for minimum or fixed-term contracts under which the consumer makes periodic payments (for example, monthly) but commits to a minimum term (for example, 12 months) and must pay a penalty to cancel early or can only cancel in limited circumstances. Examples of this type of contract include subscriptions and broadband contracts.

In contrast to previous draft guidance (which required traders to display the cumulative price of the contract), the current draft allows traders to show the total price as either: the total price for each period of the contract (for example, a total monthly price) alongside a prominent statement of the number of months the consumer is committed to pay that price for; or the cumulative price that the consumer will necessarily incur over the entire minimum period of the contract.

This is particularly important for the telecoms sector, as Ofcom's General Conditions and associated guidance on price information both refer to the provision of monthly pricing for ease of consumer comparison. The CMA's altered position to allow periodic pricing to be shown ensures consistency between the general application of the DMCCA and the specific rules that apply to communications services.

Osborne Clarke comment

The draft guidance is a must-read for all consumer-facing businesses, whether operating online or offline, as compliance with the total price provisions is not necessarily straightforward and will, for many businesses, require changes to be made to consumer journeys and/or new tech builds.

The deadline for responding to the consultation is 8 September. The CMA is keen to hear what businesses think and for any suggestions as to simple, alternative, practical solutions to achieve compliance, particularly in relation to online transactions.

Consumer-facing businesses should consider responding to the consultation to ensure that the best and simplest solutions find their way into the final guidance, which the CMA expects to publish in the autumn.