The Competition and Markets Authority (CMA) continues to work relentlessly to prevent the “loyalty penalty” that many consumers still face if they do not shop around in five key sectors, namely mobile, broadband cash savings, home insurance and mortgages.  The CMA is now also focusing on anti-virus software products and online gaming subscriptions. 

Some time ago now, the CMA set out a package of reforms, working closely with both the FCA and Ofcom, which have also carried out their own detailed interventions. The FCA and Ofcom estimated that more than 28 million customers were paying a loyalty penalty of £3.4 billion. 

The CMA has published its December 2020 update. The CMA highlights that the C-19 pandemic continues to have significant adverse effects both for consumers and businesses, not least as the five markets reviewed provide essential services, that are in many ways now even more critical to people’s lives.  Many consumers are facing extra financial pressures so the CMA is even more concerned.

The CMA has:

• taken enforcement action against harmful business practices (such as making it more difficult for consumers to terminate contracts), holding businesses to account and putting in place targeted pricing interventions; and
• published a framework for business including six principles covering three broad areas:
• transparency and not being misleading (e.g. customers should be notified before renewal);
• easy opt outs (as least as easy as it was to opt in); and
• the behaviour encouraged by the practice should be in the customer’s best interest (such as no auto-renewal onto a fixed term unless it is clearly in the customer’s interest).

Separately, the CMA has commissioned research on the literature regarding the loyalty penalty.  The research reinforced the CMA’s findings, including that business incentives are not necessarily aligned to making it easy for consumers to engage and that direct action is needed to tackle the loyalty penalty in markets.

Here are some key takeaways from the CMA update:

• is still actively enforcing and coordinating with other regulators
• it wants more power, including powers to fine businesses breaking consumer law.
• it wants consumer law specifically to cover auto-renewals and subscription services.
• it has a new focus on anti-virus software and online video gaming sectors.
• it is reviewing:
  • automatic renewals
  • whether price discount ‘claims’ are fair
  • whether consumers can easily prevent renewal
  • whether terms and conditions are fair generally
  • entitlements to refunds

The CMA is due to report further in early 2021.   Trading conditions will, for most, remain tough for some time, but this update reminds everyone of the risks, notwithstanding short term financial targets, of not playing the long game with customers.