CMA’s COVID focus shifts from excessive pricing to refund practices

The UK’s Competition and Markets Authority (CMA) yesterday discontinued three of its four investigations into pharmacies and convenience stores suspected of charging excessive prices for hand sanitiser products.

The CMA’s investigations into alleged price gouging had been running in parallel with its work on COVID-19 related consumer refunds. On Friday, the CMA published an open letter (PDF) to the package travel sector, warning of potential enforcement action if providers fail to offer the refunds required by consumer law when package holiday contracts are terminated as a result of COVID-19.

When read in conjunction with the latest findings of the CMA’s COVID-19 Taskforce, which recently reported a “substantial growth in the number of complaints about cancellations and refunds, and a decline in complaints about prices”, it seems clear where the CMA’s priorities now lie.

Clean hands after all

As we reported last month, the CMA recently opened four investigations – using its competition law powers – into suspected charging of excessive and unfair prices for hand sanitiser products during the COVID-19 pandemic.

Yesterday’s announcement (PDF) declares that three of these investigations have been closed: one because there were no grounds for action; and the other two because continuing the investigations did not ultimately align with the CMA’s general prioritisation principles (PDF) (likely due to the limited benefit that could ultimately derive from any enforcement action).

While the fourth investigation remains open (for now), the CMA’s COVID-19 Taskforce has reported a steep drop in consumer complaints regarding price increases over the past few months – down from 76 per day in April to just 11 daily complaints in June. Of course, the reimposition of lockdown rules – whether on a national scale or in local hotspots – could yet see demand for essential products spike and the revival of concerns around price gouging. The CMA is clearly alive to this, explicitly stating that it “remains vigilant to the risks of unjustifiable price rises”, but as the UK economy begins to reopen, it seems likely that pricing concerns will continue their slide down the enforcement agenda.

The same cannot be said for cancellation and refund practices.

Package travel in the spotlight

In its open letter last Friday, the CMA expressed concern that many businesses in the package travel sector are breaking the law by refusing to provide consumers with full refunds for trips that have been cancelled as a result of COVID-19. While the CMA has welcomed actions by some leading travel and holiday rentals companies to operate consumer-friendly refund and cancellation policies, it believes that too many consumers are still unfairly losing deposits and are being misled about their statutory rights.

The letter reminds businesses of the circumstances in which consumers are entitled to a full cash refund (within 14 days) when their package holiday contract is cancelled, and also warns businesses not to direct consumers who seek cash refunds elsewhere (e.g. to their insurer or credit card provider). Further, rather than waiting for consumers to follow-up or chase payment, holiday providers “should be proactively communicating with consumers and letting them know when they will be paid their refund".

Unlike with pricing complaints, consumers are continuing to draw the CMA’s attention to unfair practices regarding cancellations and refunds on a mass scale.

These complaints are not only directed at firms refusing to provide refunds, but also at those introducing unnecessary complexity into the cancellation process, or else charging high administration fees and pressuring consumers into accepting vouchers instead of cash.

With such a broad range of concerns laid bare, and with cancellations often the source of significant financial distress for consumers, it is unsurprising to find this issue firmly at the top of the CMA’s COVID-related enforcement agenda.