New consumer law to tackle drip pricing

Drip pricing and The DMCC Bill

Drip pricing is a practice where companies only advertise part of a product’s price upfront and reveal other charges later in the buying process.

In April 2023, the Government published the draft Digital Markets, Competition and Consumers Bill (DMCC Bill), which contained plans to help manage competition issues in big tech and broaden the scope of consumer law protections, including plans to protect consumers from drip pricing practices by companies. We wrote an article about some of the other provisions in the DMCC Bill, which can be accessed here.

The DMCC Bill was publicly announced as part of the King's Speech on 7 November 2023. The speech noted that the intention of the DMCC Bill is to empower consumers to help them get the deal that is right for them and increase their confidence in the products they buy and services they use.

The DMCC Bill will make the omission of material information from an invitation to purchase a separate unfair commercial practice and create a new offence within the ‘Protection from Unfair Trading’ provisions. This means that where there is an invitation to purchase, consumers must be provided with the information that the average consumer needs to take an informed transactional decision. In terms of drip pricing, this will mean that traders have to provide further information in relation to the total cost of the goods or services upfront and in all pre-contract adverts and communications. Taking this approach will reduce the ability of traders to engage in drip pricing.

Impact of Drip Pricing Practices on Consumers

The Government published a “Consultation on Improving Price Transparency and Product Information for Consumers” (Consultation) and a report titled “Estimating the prevalence and impact of online drip pricing" (Report) in September 2023 which detailed the various ways in which consumers are negatively impacted by drip pricing, for example, during the decision-making process.

The Consultation notes that drip pricing is considered to be problematic when the method is used to draw in a consumer to a low base price which is misleading given the subsequent addition of mandatory fees. Drip pricing can be less problematic when additional prices are based on the consumers preferences or decision to elect optional, additional products or services.

The Report explains that drip pricing is a common strategy used by online traders in the transport and communication, hospitality, and entertainment sectors in the UK. 46 per cent of the 525 online and mobile app providers sampled included at least one dripped fee (not including delivery fees) as part of their checkout process. The Report notes that, out of the sectors sampled (entertainment, hospitality, retail, transport & communication), dripped fees are most frequently found in the transport & communication sector (72 per cent of providers) and least frequently in the retail sector (15 per cent of providers) once delivery fees are excluded.

These statistics might resonate with consumers who use airline or travel websites, where it has become commonplace to see airlines charge a separate cost for a seat on a plane in addition to the cost of the ticket.

Where is the DMCC Bill now?

The DMCC Bill is currently making its way through the Parliamentary process. The first day of the Committee stage (which involves a line-by-line examination of the DMCC Bill) is scheduled to take place on 22 January 2024 in the House of Lords.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2024