CMA issues draft guidance on new holiday pricing rules

Proposed Competition and Markets Authority (CMA) guidance on price transparency under revised ‘unfair commercial practice’ rules will mean significant changes to how holiday prices are presented unless changed.

 

The guidance, published last week alongside a consultation on the proposals, confirms most fees, taxes and charges paid in a destination must be included in a holiday price even if collected at a hotel or airport.

 

This follows the introduction of the Digital Markets, Competition and Consumers Act 2024 that came into force in April and brought in a ban on ‘drip pricing’ and a requirement that all “mandatory charges be included in all invitations to purchase”, including in advertising. It also gave the CMA new powers of direct enforcement.

 

The CMA describes drip pricing as “showing a headline price for a product which is not a total price” and makes clear that mandatory charges include “any fees, taxes, charges or other payments the consumer will necessarily incur”.

 

If these cannot be calculated in advance, detail on how they will be calculated must be made as prominent as the total price. However, the CMA also makes clear it expects taxes, fees and charges to be included in pricing in most cases.

 

The CMA insists: “Local charges and taxes will normally be calculable and should be included in the total price.”

It notes: “If a consumer is later presented with charges not disclosed at the outset, this is likely to breach the provisions.”

 

The guidance includes travel-related examples of compliant and non-compliant pricing throughout, making clear the sector is among those in the CMA’s sights, and it notes the rules apply to “local taxes, resort fees and other unavoidable charges payable on arrival or departure at hotels, ports or airports”.

 

The CMA explains: “Responsibility for paying, or collecting, local charges and taxes will normally sit with the trader providing the accommodation.

 

“The provisions therefore apply to these charges. If the charges are payable locally in a foreign currency, the approximate charges must still be calculated using current exchange rates and included in the total price.

 

“The trader should include an explanation of how the total price was calculated.”

 

The guidance presents examples of how agents or accommodation platforms may comply, noting “price comparisons [must include] all mandatory charges and taxes, [with] failure to do so likely to breach the provisions”.

 

The CMA consultation on ‘Unfair commercial practices: price transparency’ allows nine weeks to respond until the September 8 deadline.

 

The authority promised “further engagement” through a webinar this week and in early September, and round-tables with industry associations on July 17 and 24.

 

However, it notes the guidance “applies to an array of sectors with different pricing structures”, so these opportunities will not be exclusive to travel.

 

An earlier consultation on provisional guidance saw calls for more clarity on the scope of mandatory charges, concerns that businesses would struggle to provide full details to consumers, and calls for tourist taxes to be exempted as “local taxes differ by destination”.

 

The CMA has acknowledged businesses “work within limits” but insists “it will be possible to provide a total price” in most cases, adding: “Local taxes are mandatory and, in most cases, will be reasonably calculable. Charges may differ, [but] information about how they are calculated is readily available. The timing of payment cannot change the obligations to provide the total price.”

 

Image: Shutterstock//Fotomay