Drip Pricing and Enforcement: How the DMCC Act is Changing the Rules
min read
The Digital Markets, Competition and Consumers (DMCC) Act marks a significant shift in consumer protection law, targeting practices that mislead or disadvantage buyers. In this article, we examine what drip pricing entails, the legal risks it poses, and how the DMCC Act strengthens enforcement to protect consumers and level the playing field.
Drip pricing refers to the misleading practice of traders luring consumers with deceptively low headline rates, only for additional fees to be ‘dripped’ at checkout, which increases the final price paid by the consumer.
Instead, traders are required to provide to customers all mandatory charges for a product.
The DMCC deals with drip pricing by prohibiting traders from offering a headline price without including fixed mandatory charges such as VAT or associated booking fees. Mandatory charges need to be set out with equal prominence alongside the headline price, with details of how they are calculated.
Taking VAT as an example, a trader would state the VAT sum, being 20% of the sale price.
If it is not possible to accurately calculate the total price of a product in advance, any non-calculability of mandatory charges must strictly reflect the nature of the product - this is an objective issue.
Where the nature of product means there are mandatory charges that cannot reasonably be calculated in advance, information about how these charges will be calculated must be provided in advance to enable the consumer to calculate the total price of the product – for example, providing indicative prices or a full tariff of potential prices.
Traders should not deliberately structure products so that mandatory charges are hard to calculate in advance.
The drip pricing rules apply to both physical and non-physical products such as digital content, and any failure by the business to properly present information for the headline price will automatically be considered a misleading omission by the CMA, and therefore prohibited (and void for the consumer).
Further guidance from the CMA is expected for some of the legislation, especially regarding fixed-term periodic contracts and when delivery fees need to be included in the headline price. This is likely to be published in the autumn of this year so do keep an eye out!
Enforcing drip pricing
Looking ahead, when it comes to enforcing the DMCC and the priorities in doing so, the CMA is carefully considering early cases and is clear that it wants to take strategic actions which will have the maximum impact. In the first 12 months, the CMA will take a double pronged approach: so it is working to increase guidance available to businesses whilst it begins taking enforcement actions against the most egregious infringements.
Egregious infringements being actions which would always have been a breach of consumer laws, for example things like:
- Aggressive sales practices that prey on vulnerability;
- Providing objectively false information; and
- Highly imbalanced and unfair contract terms.
There will also clearly be a focus on the new banned practices of fake reviews and drip pricing and the CMA has also made clear that it is actively monitoring previous focus areas i.e. the CMA’s investigation into greenwashing within the fashion sector; the CMA’s investigation into hidden influencer marketing and the CMA’s investigations into misleading pricing practices (for example, urgency claims and unclear reference pricing).
The CMA is not looking to probe businesses who are taking steps toward compliance but don’t quite get it right, instead it is targeting those businesses who make minimal effort toward compliance and/or have a previous history of non-compliance.
As a business, you should be looking ahead to ensure you are complying with the new consumer law in the DMCC by:
- Review processes – fake review policies, information and procedures for subscription contracts must be clear, accessible and easy to understand.
- Monitor what the CMA is doing regarding enforcement. As these are new, it will take a while for it to become clear exactly what the CMA will be considering incompatible with the rules.
What’s Next?
In our video series, we also dive deeper into:
- Subscriptions – How to design fair and compliant subscription models.
- Fake Reviews – What constitutes a fake review and how to avoid penalties.
Stay tuned for practical insights and actionable guidance to help your business navigate these changes in the DMCC Act confidently.
