The Advertising Standards Authority (ASA)’s recent decision to ban advertisements by, amongst others, Sky and Nike is a particularly interesting one as it reminds me of the powers granted to the Competition and Markets Authority (CMA) by the Digital Markets, Competition and Consumers Act (DMCC) which received Royal Assent this May. The fact the ASA is “investigating the way firms used this kind of ‘online choice architecture” is something of a shot across the bows of anyone selling wares online that the authorities mean business and intend to use the powers bestowed upon them by UK law. It’s probably reasonable to assume they’ll do so gently at first, but with maximum penalties of 10% of turnover, it could become quite uncomfortable to fall foul of this.
As often tends to be the case, I got to thinking about hotels and how this might affect the sector I have worked in (or with) for what is now a quarter of a century (crikey!).
The largest of the players in this market are not based in the United Kingdom though, so why should they be concerned? Well, the reason is because this legislation has given the UK authorities the power to deem an organisation to have “Significant Market Status” if (amongst other conditions) its global turnover exceeds £25bn or the turnover it derives from UK-based consumers exceeds £1bn, with the CMA also to request the Secretary of State revise these if they are no longer “appropriate”. As well as this turnover condition,
The DMCC affects any organisation that is deemed to have “Significant Market Status” – with that designation made (by the CMA) if any one or more of the following is met.
- The undertaking has achieved a position of significant size or scale in respect of the digital activity.
- A significant number of other undertakings use the digital activity as carried out by the undertaking in carrying on their business.
- The undertaking’s position in respect of digital activity would allow it to extend its market power to a range of other activities.
- The undertaking’s position in respect of the digital activity allows it to determine or substantially influence the ways in which other undertakings conduct themselves, in respect of the digital activity or otherwise.
The booking pathway has moved on
The biggest change in the hotel sector in the last two decades, despite the emergence of Airbnb and the like, has been in how consumers purchase and book their rooms and the emergence of online intermediaries and aggregators. As well as competing on product, there is also competition both for and within booking channels and, as that becomes more intense, so the tactics used to influence booking and buying behaviour have evolved.
Nudging is a powerful tool for changing behaviour, and with great power comes… well, you know. It’s widely used by Governments and businesses and BVA Nudge Consulting helps clients design interventions where the outcome is that the organisation “wins”, the individual “wins” and society “wins”. (Or at least none of them loses). “Deceptive Nudges”, though, use the principles of Behavioural Science to steer consumers to suboptimal choices and although often not strictly illegal in and of themselves, they are certainly frowned upon by ethical practitioners and can very easily invoke the ire of consumers if detected.
The cost of deception
As far back as 2019 the CMA was looking into how deceptive nudges are deployed in the online purchasing environment and forced 25+ online booking sites to change their conduct and marketing, while in 2022, the FCA called out BNPL providers for not making the terms of credit arrangements clear. Further, money experts including Martin Lewis and MPs like Tulip Siddiq (Economic Secretary to HM Treasury) have called for affordability checks to ensure consumers are borrowing appropriately. However, OTAs like Airbnb offer BNPL as an easily accessible alternative to paying in one lump sum.
If you use digital touchpoints – websites, email, apps, digital comms – to sell accommodation you can fall under this legislation and I think it’s reasonable to expect further scrutiny of anything that sets up choices for consumers – things like the order in which options are presented, paid rankings without clear disclosure and the prominent position of the lowest rate – when that applies only in somewhat restrictive circumstances, are things where you may need to check you are not deceiving consumers.
