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CMA issues update on work of its Covid-19 Taskforce

06 July 2020

The Competition and Markets Authority has issued an update on the work of its Covid-19 taskforce, set up to identify, monitor and respond to competition law and consumer protection law issues arising from coronavirus and the measures taken by businesses in response to it.

The update sets out the work of the Taskforce focusing on the complaints the CMA has received and the actions the CMA has taken in response. Between 10 March and 28 June, the CMA received more than 80,000 contacts about coronavirus issues. It has also received information from consumer bodies such as sector regulators, trading standards bodies and Which?

The CMA points out that most businesses are behaving responsibly and fairly, but it is concerned that a minority is (still) exploiting the situation, for example by ignoring consumers’ cancellation rights, charging excessive prices or making misleading claims about goods or services. Its key concerns relate to unfair practices in relation to cancellations and refunds and unjustifiable price increases, especially for essential goods, such as hand sanitisers.

Cancellations and refunds

Since the middle of April, the substantial majority of complaints received by the CMA have been about unfair practices in relation to cancellations and refunds and around 75% of those complaints relate to holidays and air travel. The CMA has passed the complaints about air travel to the Civil Aviation Authority. In relation to holidays and accommodation, consumers continue to raise concerns about refunds, high administration or cancellation fees and pressure to accept vouchers instead of refunds. The CMA has published guidance on cancellations and refunds.

However, in the middle of May, 58% of people were telling Which? that they were waiting for refunds for cancelled flights and holidays. And as recently last week Which? said:

“we approached the UK’s 10 biggest package holiday providers and 10 largest airlines, and found none are consistently meeting their legal requirements to refund consumers within the statutory timeframe.”

The CMA has now secured formal commitments from two holiday firms – Vacation Rental and Sykes Cottages – to offer full refunds to customers. The CMA is considering a range of interventions in relation to wedding venue operators and nursery providers, including sector-specific guidance. 

The undertaking given by Sykes Cottages to the CMA requires it to:

  • offer a cash refund to customers whose holidays could not go ahead due to government restrictions at the time and who have not already rebooked;
  • convert credit vouchers to cash, if customers prefer (and as long as the credit voucher has not been used); and
  • provide the CMA with monthly reports on how many refund offers have been made and accepted.

Unjustifiable price increases

The CMA has launched investigations into suspected breaches of competition law by four pharmacies and convenience stores relating to suspected charging of excessive and unfair prices for hand sanitiser.  It has also worked with trade associations and other regulatory bodies regarding the issue, for example issuing a joint letter with the General Pharmaceutical Council and a statement on price gouging. In addition, it has written to 277 businesses asking for more information or expressing concern about unjustifiable price increases. Some businesses have said the higher prices reflect higher prices from suppliers, so the Taskforce is investigating this further. However, the CMA says that a small number of traders increased prices to levels that were very unlikely to have been justified by cost increases in the supply chain and that such increased prices have a disproportionately detrimental effect on vulnerable consumers.

The CMA has also written to Amazon and eBay about listings quoting unjustifiable prices for essential goods. It hopes that the trend for price gouging will now reverse, but this may depend on future virus-related restrictions.  Which? disagrees the trend is reversing, having carried out some research which indicated that over a third of people have had to pay high prices for essential items with the average price difference for hygiene items being 414%.

What businesses should do

Businesses should be aware that the CMA is keeping a very close eye on coronavirus-related consumer protection issues and ensure that refund requests are dealt with promptly and fairly.  In addition, retail prices for goods which might be described as essential goods, such as hand sanitiser or face masks, should reflect their wholesale cost to the retailer.

 

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