CMA imposes £4.2m penalty and orders refunds in AA/BSM drip pricing enforcement action
If you are a business supplying goods or services to consumers in the UK, you need to take note of recent drip pricing enforcement action.
On 15 April 2026, the Competition and Markets Authority (CMA) published the outcome of one of the investigations it launched in November 2025 into the online pricing practices of eight businesses. The CMA has fined Automobile Association Developments Limited (AA) £4.2 million and ordered its AA and BSM Driving Schools to refund more than 80,000 learner drivers a total of over £760,000. The CMA found that a mandatory booking fee for driving lessons had not been included in the initial online booking price advertised by the AA.
This practice is known as “drip pricing”, namely advertising a product or service at a headline price, but then introducing (or “dripping”) additional mandatory charges as the customer moves through the buying or booking process. As a result, the final amount payable is higher than the price first shown. This enforcement action is the first time the CMA has used its consumer law enforcement powers under the Digital Markets, Competition and Consumers Act 2024 (DMCCA) to impose a financial penalty for a substantive consumer law breach and to require direct refunds for consumers.
This article will be of interest to all businesses, wherever located, which supply goods or services to consumers in the UK, especially online.
Background
In April 2025, the DMCCA came into force, significantly strengthening the UK’s consumer protection regime. The DMCCA empowers the CMA to investigate suspected breaches of consumer law and to levy fines of up to 10% of a business’s global annual turnover for infringements without prior court proceedings. One priority area under the new regime has been online price transparency. In November 2025, the CMA launched a major consumer protection drive focused on “online pricing tactics”, opening investigations into eight businesses, including the AA’s driving school divisions, the AA Driving School and the BSM Driving School, over concerns about hidden fees and other unfair practices. The other investigations are still pending.
Legal framework: drip pricing and the DMCCA
UK consumer law (as updated by the DMCCA) expressly prohibits drip pricing. This means that suppliers must include all mandatory fees in the price they present from the outset of a transaction with consumers. Any “invitation to purchase” (for instance, a webpage or advertisement displaying a product or service with a price) must clearly state the total price inclusive of all mandatory charges, taxes and fees. It is unlawful to add mandatory fees only at a later stage (even before final payment) without having disclosed them in the initial price advertised. In this case, the £3 booking charge was a mandatory fee, so it should have been incorporated into the lesson price upfront. Failure to do so breached the transparency requirements introduced by the DMCCA.
The DMCCA also reformed enforcement by giving the CMA direct fining powers. Since April 2025, the CMA can determine consumer law breaches administratively (without needing a court order) and impose penalties of up to 10% of the infringing company’s global annual turnover for serious infringements of consumer protection law (for smaller businesses, fines can be up to £300,000 if that amount is higher than 10% of the smaller business’s turnover). This power represents a significant strengthening of consumer law enforcement compared to the previous regime, which required a court judgement. In addition, the DMCCA also enables the CMA to require suppliers to provide consumer redress, including refunds, as part of its decision.
Enforcement action and penalties
As a result of the investigation’s findings, the CMA ordered the AA to refund the booking fees to the affected learner drivers and imposed a substantial fine. Over 80,000 customers of AA Driving School and BSM Driving School will receive refunds totalling more than £760,000. The amount repaid to each consumer will vary according to the number of lesson packages purchased, with the average payout being around £9 per person. In addition, the CMA fined the AA £4.2 million for breaching consumer law through its pricing practices. The combined financial impact of the CMA’s order, around £5 million in total, reflects the severity of the infringement despite the relatively small fee involved in each individual purchase.
Notably, this enforcement action was settled by agreement. The AA admitted liability (acknowledging that its pricing method infringed the law) and cooperated early in the CMA’s investigation. By settling the case at an early stage, the AA secured the maximum penalty discount available under the CMA’s settlement procedure. The initial fine was £7 million, but a 40% reduction was applied, resulting in the final £4.2 million fine announced. (A 40% discount is the highest possible reduction, reserved for cases where a business agrees to settle before the CMA issues a formal provisional infringement notice, thereby saving significant time and resources.) As part of the settlement, the AA also waived any right to appeal the decision. Affected learners will be contacted directly by the driving schools and issued refunds automatically (to the original payment card or via cheque), meaning customers should not need to take any action to receive their refund.
Significance of the decision
When the DMCCA came into force in April 2025 the CMA committed to prioritise enforcement against misleading pricing practices online, given evidence that drip pricing was widespread and harmful. This commitment is also reflected in the CMA’s Annual Plan 2026/2027. The enforcement action against AA is a “significant milestone” in that ongoing CMA campaign.
It is the first use of the CMA’s new direct enforcement powers to punish substantive consumer law breaches since the DMCCA reforms took effect. The case demonstrates that the CMA can now move quickly both to penalise unlawful conduct and require that consumers who have suffered harm are refunded. The decision sets a clear precedent for robust enforcement by the CMA under the DMCCA. Even relatively small per customer hidden fees can attract large fines when many consumers are affected.
The CMA’s Chief Executive, Sarah Cardell, underlined this point. Welcoming the outcome, Cardell noted that if a fee is mandatory, “the law is clear: it must be included in the price from the very start – not added at checkout.” With the CMA’s strengthened toolkit, she warned that “with our new powers, it will never pay to break the law or treat consumers unfairly. Where the rules are ignored, we’ll step in to put things right”.
The AA enforcement action shows that the CMA is prepared to impose high fines and mandatory refunds to enforce compliance. It is also noteworthy that the CMA concluded this investigation in around five months from launch to final outcome, indicating an accelerated timeline that suppliers may face under the new system, at least when they agree to a prompt settlement.
Practical implications for businesses
All businesses selling to consumers (particularly online) should take careful note of this enforcement action. Pricing strategies should be reviewed to ensure they are fully transparent and compliant with the law. In particular, any mandatory fee, charge or add-on (booking fees, service charges, delivery charges, etc.) must be included in the initial advertised price for a product or service. If a compulsory charge is only revealed later in the purchase process, even before payment, that constitutes unlawful drip pricing under the DMCCA and can trigger enforcement action. Businesses should therefore ensure their websites and sales practices are compliant with the DMCCA: if a mandatory fee is being added at checkout or otherwise not shown up front, that practice needs to be corrected immediately to avoid legal risk.
In addition to financial penalties and the requirement to provide redress to consumers, the reputational damage from being found in breach of consumer law (especially for a trusted consumer brand like the AA) is another serious consideration. Early compliance is preferable to enforcement. As this case illustrates, the CMA will expect businesses to ensure their pricing practices meet the required standards of transparency, and is already actively monitoring and investigating companies across sectors for similar issues. The CMA has indicated it has written to 100 businesses across 14 sectors regarding potential consumer law breaches, meaning others could face action if they do not change problematic practices.
In summary, businesses should act now to ensure all their consumer-facing pricing and sales information complies with the DMCCA’s requirements. This includes following the CMA’s published “3 Step Clear Pricing Check” guidance which asks whether businesses:
- show the total price upfront;
- include all mandatory charges; and
- clearly explain how customers can calculate the total price where this cannot be given in advance.
Businesses should also have regard to the CMA’s guidance on providing clear and accurate information about prices. Taken together, this guidance requires businesses to identify and address any practices involving hidden fees, drip pricing, false “discount” claims, or other misleading pricing conduct.
The AA enforcement action sends a clear message that the CMA is prepared to enforce the new rules under the DMCCA vigorously and at speed. Companies that fail to adapt to these standards not only risk heavy fines and consumer redress orders but also may find themselves undergoing costly and disruptive investigations. By contrast, firms that proactively ensure price transparency and fair trading will reduce their legal risk and avoid becoming targets as the CMA continues its consumer protection enforcement drive.
In addition, suppliers should note that on 20 April 2026, the Law Commission announced a significant new project, expected to commence in Autumn 2026, examining whether England and Wales should introduce a new consumer class actions regime. This follows the government requesting the Law Commission to assess whether the enforcement of consumer law could be strengthened by the introduction of a consumer class actions regime.
Thus, just as the CMA can now impose fines for infringement of consumer law as well as competition law, it is possible that in future, class actions will be able to be brought regarding infringements of consumer law in addition to the current class actions regime for competition law. This could significantly add to the litigation burden of suppliers.
Find out more about Blake Morgan’s competition and consumer law expertise, and how we can assist, here.
Share:
If you need legal advice on competition law
Speak to one of our experts
Arrange a callHow can we help?
To get in touch with one of our legal experts please fill in your details.
Enjoy That? You Might Like These:
articles
articles