CMA targets Simba for misleading online choice architecture

The question

What types of promotional tactics are in the Competition and Markets Authority's (CMA) line of sight when it comes to misleading online choice architecture? 

The key takeaway

The CMA has yet again taken action to pursue its aim of tackling harmful online selling practices. Following the CMA's investigation into Simba's advertising tactics to sell mattresses online, Simba has committed to several undertakings that will help ensure that consumers are not mislead into believing they are getting a better deal than they really are in practice.

The background

In December 2023, the CMA commenced an investigation against Simba for misleading online advertising (covered in our previous Spring 2024 Snapshot). The CMA was particularly focused on two key selling tactics: (i) the use of countdown clocks promoting hasty online purchases; and (ii) price comparisons using misleading "was" prices. Both were identified as negatively impacting consumer choice in the CMA's "Online Choice Architecture" awareness campaign.

The development

Simba has now agreed undertakings with the CMA to ensure compliance with the Consumer Protection from Unfair Trading Regulations 2008 (CPRs):

• Countdown clocks: Simba will ensure that the countdown clocks used on its websites are clear and specify prominently which exact products they apply to. Further, Simba will ensure the clocks do not give consumers a false impression that they must act quickly or that the product price will revert to the pre-sale price once the countdown ends, if this is not the case (i.e. if the clock simply resets itself when it reaches zero).
• Genuine discount claims: Simba will ensure that any "was" price referred to is genuine (i.e. that a sufficient volume of the product has been sold at that price before using it as a "was" price).

Simba had a timeframe of just over a month to ensure compliance with the above. It is also required to submit a report to the CMA, demonstrating its compliance to the commitments, within six months of signing the undertakings.

Why is this important?

The Simba undertakings follow the CMA's threat of court action against competitor mattress company, Emma Sleep, who failed to reach an agreement with the CMA in relation to similar issues. Following numerous investigations of traders in the same sector, the CMA has published guidance for online mattress selling to clarify the rules in relation to the discount and reference pricing principles for online sales. This shows the CMA's willingness to put pressure on a whole sector it believes is practicing harmful or misleading selling tactics.  In particular, we expect to see the CMA's interest in online choice architecture continue into 2025 – which will become especially risky for business as it is anticipated that the CMA will be taking up its new direct enforcement and fining powers in April 2025.

Any practical tips?

Given the risk of significant CMA fines going forwards, businesses should take time to carefully review and ensure that their current online selling practices are fully compliant with consumer regulation, in particular the soon-to-land Digital Markets, Competition and Consumers Act (DMCCA). They should also have internal processes in place to follow regulatory developments and share these with relevant internal teams, including the marketing and web teams. Above all, they must avoid using tactics which encourage hasty decisions or immediate and/or reckless spending. Learnings from the CMA's action against Simba include the need to:

• clearly communicate the time limits for any promotions and, if a countdown clock is used, reset the price to the product's usual selling price when it reaches zero – and certainly not resetting the clock to start running down again; and
• keep all records to evidence the 'was' price at which the product or service was being sold prior to the promotion.

Autumn 2024