Call to action for businesses involved in dynamic pricing

On 13 November 2024, the Competition & Markets Authority (CMA) announced its launch of a new project to consider how dynamic pricing is being used across different sectors of the UK economy. 

This is separate to the CMA’s ongoing investigation into Ticketmaster’s use of dynamic pricing in the sale of tickets for Oasis’ reunion tour. For more on the issues in that investigation, see our article: Listen Up as we explain dynamic pricing Little by Little.

In this briefing, we explain the practice of dynamic pricing, summarise what the CMA will be doing as part of the project, and outline the key takeaways for businesses that either use or might consider using dynamic pricing.

What is dynamic pricing and is it allowed?

Dynamic pricing is a common pricing strategy in some sectors, such as travel and leisure (which seems to be a focus for the CMA in this project). Businesses use dynamic pricing to adjust their prices, up and down, according to changes in demand. This is generally not unlawful in itself. The ability to make rapid price adjustments can provide businesses with a strategic advantage. Depending on the circumstances, dynamic pricing can also benefit customers (eg better value through discounts and promotions).

However, there are competition and consumer law considerations for businesses that use (or may consider using) dynamic pricing. For example, dynamic pricing by a business that has substantial market power on a market in the UK could constitute an abuse of dominance under competition law as a form of "excessive pricing", (ie where sale prices are unreasonably high relative to the cost of production, and unfair either in themselves or when compared with competing products). Consumer protection laws specify certain circumstances in which dynamic pricing can be unlawful, such as if there is a lack of transparency or if consumers are put under time pressure to make a decision.

The use of dynamic pricing for ticket sales is particularly controversial. The EU has picked this up as part of its digital fairness fitness check on consumer law. 

What will the CMA be doing?

As part of the project, the CMA will be considering:

• The different scenarios in which dynamic pricing is being used across the economy
• The commercial and consumer benefits of dynamic pricing
• Whether dynamic pricing creates challenges for competition and consumers

The project isn't a formal investigation, market study or market investigation. However, the information that the CMA gathers under the project will be used to help inform government’s consideration of the issues raised by dynamic pricing. This may include, but isn't limited to, the investigation into Ticketmaster or new restrictions on dynamic pricing. For example, under the new Digital Markets, Competition and Consumer (DMCC) Act 2024 (which we discuss in our briefing), the government is empowered to create new offences that are blacklisted or always unfair. It is possible that the government could use this to create an offence of using dynamic pricing perhaps in combination with a lack of transparency in a way that amounts to pressure selling.    

Key takeaways for businesses

During the course of the project, some businesses may receive requests for information from the CMA. Businesses that do not may still have the opportunity to engage with the CMA, for example, through responding to consultations (to be launched in due course).

There is no formal deadline for the CMA to complete the project. However, we think that the CMA will be aiming to complete the project so that it is ready to take any action soon after the consumer provisions of the DMCC Act come into force (which is expected to be in April 2025). Under the DMCC Act, the CMA will have the power to take direct enforcement action against businesses that breach UK consumer law. This means that the CMA will be able, for example, to impose fines of up to 10% of worldwide annual turnover for consumer law infringements, without having to go through the courts.

Given the potential repercussions of using dynamic pricing in a way that may breach the law, particularly from April 2025 onwards, businesses who have experience of dynamic pricing should regard the project as an invaluable opportunity to ensure that their voices are heard on the issue. Also, the project’s findings could help to guide compliance in this area.  

Our consumer and competition law specialists can assist businesses with developing strategies for engaging with the project, responding to information requests and consultations, and liaising with the CMA. Please contact a member of the competition team for more information.   

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