Government responds to CMA's investigation report on Citizens Advice 'super-complaint' on loyalty penalties

Government responds to CMA's investigation report on Citizens Advice 'super-complaint' on loyalty penalties

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The response published by the Department for Business, Energy and Industrial Strategy (“BEIS”) last month, states a commitment from the Secretary of State for BEIS to ensure that Government and regulators take further actions on the recommendations made by the CMA in its report dated 19 December 2018.


A super-complaint can be raised by a designated consumer body under the Enterprise Act 2002 where it considers features of a market to be (or appearing to be) harming consumer interests. In 2018, the Competition and Markets Authority (the “CMA”) received a ‘super-complaint’ by consumer body, Citizens Advice on the basis that companies were found to be charging their existing long-term customers higher prices than new customers. This can be regarded as a “loyalty penalty”. Citizens Advice presented their submissions across five individual markets (mobile, broadband, cash savings, home insurance and mortgages).

The CMA’s report

After investigation into each of the markets concerned, the CMA concluded that there existed on average, a total loyalty penalty totalling some £4 billion per year. This resulted from what the CMA considered to be ‘harmful’ company practices including exit fees, lengthy cancellation processes and automatic contract renewals.

In response to their findings, the CMA issued eight cross-market recommendations to both regulators and the government. Namely:

  • to impose greater enforcement and regulatory powers for regulators and the CMA to tackle ‘harmful’ company practices;
  • to potentially reform legislation and regulations to include fines where ‘harmful’ company practices occur;
  • to publicise total loyal penalties in key markets and for each supplier;
  • to promote consumers ability to switch service providers;
  • to provide consumers with control of their data and furthering ‘Smart Data Review’;
  • to share best practices on remedies to tackle ‘harmful’ company practices;
  • to consider imposing pricing regulations/caps to protect consumers; and
  • to improve understanding of which consumers pay loyalty penalties, and across which markets.

Alongside this, the CMA provided further recommendations to the Financial Conduct Authority (the “FCA”) as well as Ofcom, on how the loyalty penalty could be tackled in the five markets addressed in the super-complaint.

In March 2019, the CMA announced the terms of the Loyalty Penalty Working Group, a body to oversee its recommendations. 

Government Response

In a letter to the CMA last month, BEIS set out their intention to tackle issues surrounding the loyalty penalty, in particular:

  • to ensure that both Government and regulators now take further action on the CMAs recommendations to tackle harmful business practices; and
  • to deliver better outcomes for consumers.

On stopping harmful business practices, the Government says regulators should be guided by good practice in their approach to enforcement including:

  • Exit/entry equivalence: people must be able to exit a contract at least as easily as they can enter it
  • Auto-renewal should generally be on an ‘opt-in’ basis upfront, and include a clear and prominent option without auto-renewal in most markets
  • Exit fees should not be used after any initial minimum/fixed term
  • Auto-renewal onto a fresh fixed term should not generally be used
  • Customers must be sufficiently informed about the renewal and any price changes (through sufficient notifications) in good time
  • Switching should generally be managed by the gaining supplier so that customers do not have to contact their existing supplier if they want to move

Citzens Advice Response 

Citizens Advice issued a statement welcoming the Government’s response but stated as being “disappointed by the lack of actions from regulators”, in particular naming the FCA and Ofcom. Citizens Advice went on to urge that regulators “need to set out their plans urgently on how they will tackle this systematic scam”.


There seems to be broad agreement from the Government, the CMA and Citizens Advice about the importance of tackling loyalty penalties. However the dissatisfaction from Citizens Advice on the progress of this suggest there is some way to go in this regard.

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