The Competition and Markets Authority (CMA) has issued the outcome of one of the investigations that it launched in November about pricing transparency. It has found that AA Driving School and BSM Driving School failed to display the total, unavoidable price upfront when consumers booked online driving lessons. Both driving schools are owned by Automobile Association Developments Limited (the AA).
Drip pricing
The Digital Markets, Competition and Consumers Act 2024 (DMCC) requires that unavoidable fees are included in the initial advertised price. It is unlawful to reveal mandatory charges only at checkout, even if they are eventually shown before payment.
In this case, a mandatory booking fee of £3 was excluded from the headline price and only revealed later in the checkout journey. This constitutes illegal "drip pricing", which misleads consumers and breaches transparency requirements under the DMCC. This affected both new customers, who only saw the full price at checkout; and returning customers, who saw the booking fee presented separately and added later to the total.
Fines and refunds
The CMA has imposed a £4.2 million fine for breach of consumer law as well as refunds of over £760,000 to more than 80,000 consumers. The amount repaid to individual consumers will vary depending on how many lesson packages they purchased, with the average payout around £9. Although each individual amount is small, it shows the cumulative effect on a larger business. In this case, the total cost of the fines and refunds is close to £5 million. The AA no doubt also incurred legal costs in responding to the investigation. And the reputational cost to a brand built on trust is hard to quantify.
This decision reflects the CMA's enhanced ability to order redress, not just impose penalties. This case also marks the first time the CMA has imposed a financial penalty for substantive consumer law breaches and secured consumer refunds using its new direct enforcement powers under the DMCC Act.
A party under investigation may enter into a settlement with the CMA if it admits to breaching consumer law, agrees to pay a penalty and agrees to a streamlined administrative procedure for the remainder of the investigation. Settlement helps to provide significant procedural efficiencies for the CMA and can result in a penalty discount of up to 40%. In this case, the CMA said that the initial penalty was £7 million, reduced by 40% to £4.2 million due to the AA admitting that it had infringed consumer law, settling early and engaging constructively with the CMA. This is a hefty fine but shows that early settlement can materially reduce financial exposure, but does not avoid fines or consumer redress. The AA has also agreed not to appeal. The case illustrates the CMA's shift from court-based enforcement to administrative sanctions.
Wider context
Of course, it's not just financial pain here and, as mentioned above, the damage to the AA's reputation as a trusted brand will be significant too.
The case forms part of a wider CMA enforcement drive against drip pricing, hidden or mandatory service fees, and other misleading online pricing practices.
The CMA issued six other investigations as part of its enforcement drive against drip pricing, so we are waiting for the outcome of those. However, we'd suggest that you don't wait to review any pricing model involving mandatory fees, default charges, or non-avoidable add-ons. The case is the first illustration that under the new regime, non-compliance carries real financial risk, including compulsory refunds and significant penalties.
For more information, see our consumer law hub.
