The Competition and Markets Authority (CMA) has launched an investigation into Trainline, Virgin Atlantic, and Red Driving School for alleged drip pricing practices. Trainline, the only listed company among the three, saw its shares plunge by 14% on Wednesday following the announcement.
CMA's Consumer Protection Drive Targets Hidden Fees
The CMA's investigation aligns with Prime Minister Andy Burnham's broader crackdown on hidden fees and add-on charges that burden consumers. The watchdog's consumer protection drive, however, predates Burnham's arrival and was enabled by the Digital Markets, Competition and Consumers Act of 2024, passed under the previous Conservative government. This legislation granted the CMA direct enforcement powers, allowing it to act without going to court under consumer protection laws.
The regulator has already used these powers, opening eight cases last November and fining driving schools AA and BSM, as well as ticketing site StubHub UK. The current investigation focuses on various forms of alleged drip pricing, which involves not being upfront about mandatory add-on charges.
Trainline's Response and Shareholder Concerns
Trainline issued a statement noting that it has "proactively engaged with the CMA over several months and is taking steps to enhance the presentation of certain fees." This raises questions about why the company did not fully comply with the regulator's demands from the outset. Regular users of Trainline's app are aware of a fee at the end of the booking process for about 30% of journeys, but the company argues that the fee may depend on the type of ticket, making it difficult to state precisely until the customer has chosen.
Despite these technicalities, the CMA observed transactions with additional fees ranging from 50p to £2.79. The investigation comes at a challenging time for Trainline, as it awaits the potential launch of a rival fee-free ticketing app from Great British Railways, the new state-owned railway operator.
Impact on Consumer Rights and Market Transparency
The CMA's investigation, while still at an early stage, sends a strong message about the importance of transparency in pricing. The watchdog has the power to order refunds and fine companies up to 10% of their turnover if wrongdoing is found. No wrongdoing has been established yet, but the investigation highlights the ongoing regulatory focus on consumer protection in the UK.
Trainline's shareholders are left to question how the situation escalated to a formal investigation, given the company's months of engagement with the CMA. The probe adds to the pressures on Trainline as it navigates the competitive landscape of railway ticketing in the UK.
