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Competition & antitrust

Competition & Markets Authority takes action against unfair practices arising from Coronavirus

In March 2020, the CMA established a dedicated COVID-19 taskforce to identify, monitor and respond to competition and consumer concerns arising from the COVID-19 pandemic and the task force has already been contacted more than 80,000 times.

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In March 2020, the CMA established a dedicated COVID-19 taskforce to identify, monitor and respond to competition and consumer concerns arising from the COVID-19 pandemic and the task force has already been contacted more than 80,000 times.

The CMA has so far published three update reports (24 April, 21 May and 3 July) based on its monitoring and assessment of complaints received, as well as the information received from consumer bodies and through other enforcement partners.  In their latest update of 3 July, the CMA confirm that their principal concerns remain as they were at the time of their previous updates, namely, unfair practices in relation to cancellations and refunds, and unjustifiable price increases, particularly for essential goods.  This article looks at the key patterns and trends identified by the CMA, as well as the steps it is taking to stem harmful practices.

Unfair practices in relation to cancellation and refunds

Since mid-April, the majority of complaints received by the CMA have been about unfair practices over cancellations and refunds. These complaints included firms refusing to provide refunds; introducing unnecessary complexity to the process of obtaining refunds; high administration or cancellation fees; and pressuring consumers to accept vouchers instead of refunds. Nearly three-quarters of cancellation complaints received by the CMA relate to holidays and air travel.

The taskforce has prioritised four sectors: holiday accommodation (pressuring consumers to accept vouchers instead of refunds); weddings and private events (venues refusing to refund any money and telling people to claim on their insurance); nursery and childcare providers (asking people to pay high sums to keep a place open for their child while nursery is closed); and package holidays.

Action taken on cancellation and refunds includes:

  • The CMA has issued guidance to businesses and consumers setting out its general views on how the law operates over cancellations and refunds.
  • The CMA is considering a range of actions regarding weddings and private events which is likely to include further advice for the sector in how to comply with consumer law.
  • As for holiday accommodation, the CMA has been successful in obtaining a formal commitment from Vacation Rentals, which operates accommodation sites, to offer full refunds to customers who booked holiday homes but could not stay owing to lockdown restrictions. Similar commitments have also been obtained from Skyes Cottages. These two companies collectively account for most of all complaints received about holiday lets.
  • Continued working with other enforcers of consumer law, including the Civil Aviation Authority, the FCA and Ofcom.

Unjustifiable price increases

Although overall the volume of price-related complaints received by the CMA remains at a relatively low level, the CMA has reasserted that it remains vigilant to the risks of unjustifiable price rises, particularly if new restrictions are introduced in order to contain further outbreaks.    The CMA’s data shows that the most complained about product is hand sanitiser, followed by toilet paper, rice, chicken and other meats, and that the largest price increases concern hand sanitiser, with a reported average rise of just under 400%.

The CMA has taken a number of steps to deal with unjustifiable price rises including:

  • Writing to 264 traders that have collectively been the subject of 4,600 complaints.
  • It is also collecting further evidence about price rises further up the supply chain and then will need to make a distinction between price increases which reflect the higher cost of doing business during these times, and price gouging, which is a type of exorbitant profiteering. It may be difficult to identify where in the supply chain the cost increases are hitting hardest, and the CMA’s efforts in this area are being keenly watched.
  • Opening investigations into suspected breaches of competition law by four pharmacies and convenience stores. The investigations relate to suspected charging of excessive and unfair prices for hand sanitiser.
  • Working with trade associations, regulators and other bodies to clarify expectations and warn about the potential consequences of charging unjustifiably high prices.

Looking ahead

The CMA’s updates provide a telling picture of the impact of the COVID-19 crisis on consumers and businesses from a competition and consumer perspective but a full picture of the detriment to consumers will take some time to emerge.

It remains to be seen whether any of the CMA’s investigations lead to collective consumer proceedings via CMA enforcement action against companies under investigation. We also wait to see which legal standard the CMA applies to opportunistic pricing conduct/price gouging.  Excessive pricing is a type of abuse under Chapter II/Article 102, where single firm dominance is required. It may prove to be the case be that the CMA is willing to apply the existing competition framework in an extended way against various areas of misconduct occurring during the pandemic.

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Gurpreet Chhokar

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gurpreet.chhokar@collyerbristow.com