The Legality of Dynamic Pricing: Navigating Consumer Rights and Regulatory Reform

Introduction
Despite the excitement surrounding Oasis’ highly anticipated reunion tour, their first since 2009, a significant controversy took centre stage instead. Hundreds of fans lodged complaints with the Advertising Standards Authority over Ticketmaster's ’dynamic pricing’ model. While this practice is relatively uncommon in the UK, standing tickets originally priced at £135  skyrocketed to as high as £480 due to high demand, leaving many fans frustrated after queuing on the site for hours. 

While Oasis has clarified the responsibility lies with the event organisers and management team, this incident has ignited a broader debate among consumer law experts regarding the legality of dynamic pricing and the urgent need for regulatory reforms to protect consumers.

UK Legality Concerns
UK consumer protection law contains certain provisions to prevent misleading commercial practices against consumers. The Consumer Protection from Unfair Trading Regulations 2008 stipulates a breach occurs when a trader materially misrepresents the price of goods and services, leading consumers to make a different ‘transactional decision’ than they would have otherwise. This decision reflects the impact of potentially misleading information on a consumer’s purchasing behaviour, such as whether to buy a product, how much they are willing to pay, or even whether to choose one retailer over another. In the case of the Oasis-Ticketmaster controversy, the lack of transparency about its dynamic pricing model likely pressured many fans to purchase a ticket they would have otherwise deemed too expensive within a short timeframe. While dynamic pricing isn’t inherently unlawful under UK consumer protection law – since businesses have the right to set their prices – it emphasises the need for transparency in the design and practical implementation of dynamic pricing to prevent unfair commercial practices.

Additionally, there are further legal implications regarding dynamic pricing techniques under UK competition law, which prohibits market behaviours that harm competition. This is particularly relevant when dominant businesses abuse their market position to exploit consumers. For instance, when companies such as Ticketmaster employ dynamic pricing to significantly inflate ticket prices,  It can prompt regulatory investigations,  potentially constituting an unlawful exploitation of their market power. These unethical pricing practices can harm consumers by directly limiting their choices and forcing them to pay above market value. As such, the government’s consultation with the Competitions and Markets Authority (CMA) in reviewing dynamic pricing highlights the necessity for greater scrutiny to protect consumers and ensure fair competition in the marketplace, including potential regulatory reforms.

Proposed Regulatory Reforms
The upcoming Digital Markets, Competition and Consumers Act 2024 will significantly impact dynamic pricing practices by enhancing the authority of regulatory bodies, including the CMA. Specifically, this legislation will empower the CMA with the authority to take independent enforcement action against businesses violating UK consumer law, bypassing the traditional court procedures currently required. Should the CMA conclude that a breach has occurred, it may impose fines of up to 10% of a business’ global annual turnover, thereby incentivising businesses to enhance transparency in their pricing models. This expansion of enforcement power underscores the CMA’s crucial role in fostering a more balanced environment for dynamic pricing, as it will closely monitor and evaluate the implementation of these strategies.  This will ensure businesses do not compromise consumer protection through unfair exploitation.

Specifically aimed at regulating dynamic pricing, the Sale of Tickets (Sporting and Cultural Events) Bill has recently been proposed in the House of Commons by Labour MP Rupa Huq. This legislation seeks to enhance transparency in ticket prices under dynamic pricing models. In recognising the benefits of dynamic pricing,  like providing cheaper early tickets, this proposed legislation does not outlaw it completely. It would require ticket sellers to provide consumers with maximum prices at the beginning of the online purchasing process. Consequently, this reduces pressure on consumers to make quick purchasing decisions. With its second reading scheduled in Parliament later this December, this proposed law has already gathered support from other MPs, and the current Labour government under Keir Starmer has expressed its commitment to addressing “issues around the transparency and use of dynamic pricing, including the technology around queuing systems which incentivise it.” Therefore, this legislative effort marks a significant step towards ensuring fairer ticketing practices from a consumer perspective.

What the Future Holds
As dynamic pricing becomes more prevalent, it is essential to strike a balance between allowing businesses to set prices and protecting consumer interests from potential exploitation through unfair pricing practices. Both the Digital Markets, Competition and Consumers Act 2024 and the Sale of Tickets (Sporting and Cultural Events) Bill represent significant, albeit distinct, legislative approaches to enhancing transparency and accountability in pricing practices.  They aim not only to safeguard consumer rights but also to promote fair competition. Regardless of the outcomes of these proposed legislative changes, the importance of regulatory reforms in establishing stricter, enforceable guidelines for the future of dynamic pricing practices is clear.

By Kevin Leong