Rishi Sunak, in an effort to alleviate the financial burden on consumers, has unveiled plans to tackle hidden online charges. These measures aim to address issues such as fake reviews, confusing labels, and undisclosed fees across various products, from train tickets to food deliveries. The government has initiated a consultation today to gather the opinions of both consumers and businesses on these detrimental online practices. Let’s delve into the key proposals and assess their potential impact on reducing the cost of living.
A new consultation will look at the hidden charges consumers are forced to pay online
Eliminating Hidden Fees and Drip Pricing
When engaging in online shopping, customers often come across discounted products, but are frequently confronted with unexpectedly hefty administrative fees for items like concert or train tickets. The government has released research on the pervasive issue of drip pricing and hidden fees. Drip pricing involves the introduction of fees after the customer has commenced shopping, with booking fees being revealed right before checkout. Often, consumers are enticed into purchasing a product due to its low base price, only to find additional fees later on. The research uncovered that this pricing strategy is widespread, with over half of entertainment and hospitality providers utilizing it. The transportation and communication sectors were found to be among the worst offenders, with almost three-quarters of providers adopting this approach. Examples of drip pricing include long-haul flight tickets being sold without luggage, which is later charged as an optional fee during the purchase process. Similarly, products like phones may be sold without charging cables, while printers are sold without ink cartridges, both of which are then sold as optional fees. Cumulatively, consumers in the UK bear an annual cost of £1.6 billion due to hidden fees, according to government data. Existing legislation mandates that businesses provide transparent and comprehensive information about prices and any additional charges upfront. Failure to do so could lead to businesses being guilty of a criminal offense. The government now seeks to strengthen the law concerning drip pricing and is soliciting public opinion on the need for further intervention in this area.
Enhancing Clarity in Product Labeling
A common criticism is that certain promotional offers lack clear labeling, particularly in cases of multi-buy discounts or lower prices for customers with loyalty cards. Consumer group Which? recently criticized Tesco for its “misleading” Clubcard prices due to a lack of detailed unit pricing in their loyalty card offers. Proposals have been put forth to simplify unit pricing and require retailers to display the total selling price and total unit price, enabling consumers to compare similar items more easily. As part of this initiative, the Department for Business and Trade is suggesting reforms to the Price Marking Order (PMO) to ensure consistent application of unit pricing, including during promotions and with loyalty schemes. In addition, certain sections of the existing guidelines may be amended to require display of unit prices by kilogram, liter, square meter, cubic meter, or number. Retailers selling items by weight or volume will be asked to choose a single measure and apply it uniformly across comparable products. Sarah Cardell, CEO of the CMA, stated that this consultation aligns with the CMA’s recommendations to the government regarding the imposition of clear rules for price labeling on supermarket shelves, as well as their ongoing efforts to combat fake online reviews. Cardell views this as an important step toward greater transparency and clearer regulations for consumers when shopping. The CMA will contribute to the consultation, and further updates on their work will be provided later this year.
Eliminating Fake Reviews
The government aims to curb the prevalence of fake online reviews, as previously announced in the Digital Markets, Competition, and Consumers Bill. Kevin Hollinrake, Minister for Enterprise, Markets, and Small Business, emphasized that consumers should have confidence in the authenticity of reviews, without the risk of being deceived by reviews created by company “bots.” Traders often pay or incentivize individuals to submit reviews that are not genuine. Positive fake reviews might be used to promote their own products, while negative fake reviews might be posted on competitor’s products to gain an advantage. Research from last year indicated that approximately 11-15% of all reviews on the nine most commonly used shopping platforms were fake. Disturbingly, consumers struggle to identify well-written fake reviews and are 3.1% more likely to purchase a product when exposed to them. The government intends to establish policies within businesses that facilitate the reporting of suspicious activities by consumers. It should be noted that businesses are unlikely to face enforcement action solely on the basis of publishing a single fake review.
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