The CMA on Wednesday (19 August) confirmed it had launched three new consumer protection investigations amid concerns customers were not being shown total prices upfront.
Besides Virgin Atlantic, the CMA is investigating Trainline and RED Driving School as part of what it described as "a wider clampdown on misleading pricing practices".
Last year, the CMA launched eight formal investigations and issued more than 100 letters outlining concerns about unfair pricing practices.
The holiday and package travel sector, with 19 advisories, topped the list of the 14 types of businesses of concern to the CMA, although no travel businesses were then among the eight identified for formal investigation.
Outlining its three new probes, the CMA said it was looking specifically at those instances where mandatory charges are separated from the headline price or are added later in the buying process, which it defines as "drip pricing".
"These practices leave consumers facing unexpected costs or having to calculate the true cost themselves," said the CMA, adding: "Such practices can also impact competition between businesses, as a firm using drip pricing may falsely appear to be cheaper than a competitor and attract more customers."
No indication yet of any legal infringements
Its investigation into Virgin Atlantic will explore whether any mandatory resort fees and local taxes have been included in the airline's upfront prices shown to customers buying package holidays. "These fees vary but can cost hundreds of pounds and significantly increase the price of a holiday," said the CMA.
It confirmed Virgin Atlantic, Trainline and Red were all sent advisory letters during its first "consumer protection drive" last year, making use of new enforcement powers.
"These letters put the businesses on notice and remind them of their obligations under consumer law, but the CMA remains concerned about their pricing practices following ongoing monitoring," said the CMA, adding this was just the start of its investigations and that it had not yet reached any conclusions about whether the three firms have broken the law.
Should a company be found to have infringed the law, the CMA can order businesses to pay compensation to affected customers and fine them up to 10% of global turnover.
Earlier this year, the AA and British Driving School were fined £4.2 million and ordered to pay back consumers £760,000 after failing to disclose a £3 transaction fee at the earliest opportunity in what was the first case settled under the CMA's new powers.
However, speaking at the Advantage Travel Partnership conference, Travel Trade Consultancy Director Martin Alcock revealed the fine was charged at a reduced price, likening it to paying a parking ticket early. He estimated the full fine could have run to £6-7 million for a £760,000 deficit to consumers.
'The first price seen should be the price paid'
Emma Cochrane, the CMA's Executive Director for Consumer Protection, said: "At a time when many households are watching every pound they spend, it is important that people are not surprised by extra fees when booking train and coach tickets, holidays or driving lessons.
"Clear pricing helps people compare offers confidently and choose the option that works best for them. Unexpected mandatory charges make this much harder, which is why the CMA initially put these firms on notice over concerns about their pricing practices and is now opening formal investigations.
"The first price customers see should be the price they pay."
The CMA added it will now engage with Virgin Atlantic "and gather evidence to consider whether the CMA thinks Virgin Atlantic has infringed consumer protection law". "At this initial stage, it should not be assumed that Virgin Atlantic has infringed consumer protection law, and no finding has been made," it said.
A Virgin Atlantic Holidays spokesperson said: “We take our responsibility to customers incredibly seriously and we always want to ensure they can make an informed decision when booking a holiday with us.
"Mandatory fees are indicated at multiple stages throughout the booking journey. We are reviewing the points raised by the CMA carefully and will cooperate fully with its investigation."