Drip Pricing – What Your Business Needs to Know

Drip pricing (the practice of adding non-optional charges to the initial price during the purchase process, often leading to a higher final price than initially advertised) is undergoing significant regulatory changes under the Digital Markets, Competition and Consumers Act 2024 (the "DMCC").

These changes aim to enhance transparency and protect consumers from misleading pricing tactics and will strengthen the powers of the Competition and Markets Authority to enforce them.

Which businesses are impacted?

The DMCC applies to "traders", which generally speaking, will include any person or entity acting for business purposes. In other words, the Act's application is very broad and will apply to most (if not all) businesses.

What's changing?

• Total Price Disclosure: Businesses must now include all non-optional costs, such as delivery fees and booking charges, in the initial price presented to consumers. If certain costs cannot be calculated in advance, businesses must provide clear information on how these costs will be determined. The DMCC goes further than the Consumer Protection from Unfair Trading Regulations (CPUT) in this regard as, whilst CPUT prohibited businesses from engaging in unfair commercial practices which might have captured 'drip pricing', there was nothing in CPUT that expressly addressed 'drip pricing'. The DMCC lays down specific rules in relation to 'drip pricing', and a more robust enforcement regime for the same. 
• Equal Prominence: Any additional charges that cannot be calculated upfront must be displayed with equal prominence to the total price. This ensures consumers are fully aware of potential extra costs before making a purchase.
• Consumer Protection: The DMCC categorises misleading or fake consumer reviews and drip pricing as automatically unfair practices. This means businesses engaging in such practices can face significant penalties.

What do businesses need to do?

To comply with the new regulations, businesses must:

1. Review Pricing Strategies: Ensure all non-optional charges are included in the initial price or clearly explained if they cannot be calculated in advance.
2. Update Marketing Materials: Adjust advertisements and online interfaces to reflect the total price and any additional charges prominently.
3. Train Staff: Educate employees on the new requirements to avoid inadvertent non-compliance.
4. Engage with Legal Experts: Consumer aspects of the DMCC are not yet in force and will be implemented through secondary legislation, which is expected in the near future – see our fake consumer reviews article in relation to the expected timing of implementation. We will be keeping abreast of these changes and can advise on how to best navigate the DMCC Act and its implications for your business. 

The DMCC’s new rules on drip pricing are designed to foster a fairer marketplace by ensuring consumers are not misled by hidden costs. Businesses must adapt their pricing strategies and marketing practices to comply with these changes and avoid substantial penalties.

Contact us to discuss any of the points raised here or for guidance on staying ahead of the upcoming consumer law amendments introduced by the Act. For more on the changes to consumer law as a result of the DMCC, see our articles on fake reviews and subscription pricing.