Essentially the last piece of the puzzle for the Competition and Markets Authority (CMA) investigation into Emma’s pricing launched in 2022, CMA v Emma Matrazen GmBH and others decides a specific point on sales volumes, but in doing so provides a useful synopsis on broad principles of reference pricing and what to take into account when considering whether a Reference Price is misleading.

Legal context and the CMA’s investigation

'Reference price' is the term used to describe the higher price when advertising a discount (also referred to as 'was/now' pricing).

The case was brought under the Consumer Protection from Unfair Trading Regulations 2008 (CPRs) which are revoked and replaced by the Digital Markets, Competition and Consumers Act 2024 (DMCCA). The key principles in law remain similar and although the DMCCA does differ in some significant respects, see our May 2025 retail law roundup for our DMCCA guidance. The CPRs no longer apply, but the prohibition on unfair commercial practices, including misleading actions are in the DMCCA, as is the option for the CMA to seek enforcement through the Court.

Having previously settled the challenges regarding urgency messaging (such as using countdown clocks to suggest prices were only available for a limited time), Emma had also accepted that it should change its approach to the period of time for which products were available at the reference price. The issue which remained was whether or not a specific number of products had to be sold at the reference price to ensure that it was not misleading. The CMA’s position was that Emma should apply a 'fixed volume requirement' ('FVR') and that the FVR should be at a ratio of one full price product to every two discounted products (1:2 FVR).

The court sought to assess whether Emma had committed an infringement of the CPRs and if so whether an enforcement order should be made under Schedule 13 of the Enterprise Act 2002. It is at the court’s discretion whether or not to grant an enforcement order. 

Assessment in the court

The court had to decide whether or not Emma had committed a prohibited unfair commercial practice by causing the average consumer (as defined in law) to make a transaction decision they would not have taken otherwise as a result of a misleading action. 

It is established precedent that the court does not need expert evidence as to the effect that reference pricing might have on consumers generally but can assess those issues for itself by reference to the average consumer (who is reasonably well informed, reasonably observant and circumspect). A transactional decision is not limited to the decision to purchase and can include going into a store or clicking on a website. 

The judge noted that because of the procedure applied, there had been no cross-examination of the witnesses and the fact that the parties were not agreed on some facts had not been resolved. Therefore the judge ruled based on the facts he accepted from the two written witness statements. The analysis on FVR is specifically tied to the sale of mattresses and with the judge working on the following basis:

• Mattresses are purchased approximately every seven to eight years.
• When making a relatively high cost and infrequent purchase such as a new mattress, UK consumers are well-informed and price-sensitive, often using online research and price comparison tools before making a purchase.
• The average consumer is influenced by high levels of seasonality with demand for mattresses peaking around promotional periods such as Black Friday, Boxing Day and January sales with less activity often during May and June and the pre-Christmas season.
• The average consumer of the products will be able to defer the purchase of a mattress.

The judge did not accept the CMA’s interpretation of Emma’s internal pricing guidance as being indicative of an intention to breach the law because it could be interpreted in different ways.

Regulatory guidance: CTSI, CAP and the ASA

The CMA provided guidance from the Chartered Trading Standards Institute (CTSI), and a CAP newsletter, as well as two rulings from the Advertising Standards Authority (ASA). Whilst not binding on the court, the judge noted “the views of the ASA and of the CTSI on the perspectives of an average consumer are entitled to a degree of respect” and highlighted that the guidance noted that significant sales at the higher price might support the proposition that it is genuine, it was not considered in isolation: 

CAP News noted “If you can't demonstrate significant sales at the higher reference price, or that this was a realistic selling price, the ad is likely to be problematic. What is “significant” will depend on the product and the frequency with which that type of product is usually purchased.”

CTSI indicated that an assessment could consider whether “significant sales made at the higher price prior to the price comparison being made or was there any reasonable expectation that consumers would purchase the product at the higher price?”

The judge’s analysis

The judge put more emphasis on whether the price was 'genuine' or 'realistic', as opposed to the 'usual selling price'. He identified two scenarios where he considered it was feasible that even if no, or very few, products were sold at the Reference Price consumers would not be misled. 

1. A selling price is set based on Emma’s assessment that it is realistic in that it could make good quantities of sales to customers who are less price sensitive or less inclined to wait, sells a small number but then decides it would be commercially beneficial to reduce the price. On applying a discount, more mattresses are sold.
   
   In this scenario the judge did not consider the consumer buying a discounted mattress in the first week would be misled, but accepted that the longer the mattress is advertised as discounted, the less realistic the reference price would be as a comparator.
   
   
2. Emma advertises a mattress for £1,000 for three months believing it is a realistic price but makes no sales, not knowing a competitor is selling a comparable mattress at £800, on realising, Emma discounts to £750, markets it as a “£1,000 £750” and sales soar.
   
   The more sales made at £750, or the longer the discount was applied, the more the average consumer might see the £1,000 as unrealistic, but the judge did not see that consumers would consider the price unrealistic on day one of the discount.

When considering whether the reference prices applied had constituted a misleading action the judge concluded:

• The average consumer would pay some regard to the number of sales of the relevant product that Emma has made at that price.
• An average consumer would also consider it relevant to consider whether Emma had a genuine belief that it could make significant sales at the reference price (i.e. that it was a realistic price).
• An average consumer might still conclude that the reference price is 'genuine' or 'realistic' if Emma had a real belief that it could sell significant quantities of the relevant goods at that price.
• If the belief referred above is also objectively reasonable, that would provide a further indication in favour of the proposition that the reference price is genuine or realistic.

The judge ruled that an argument that use of a reference price is necessarily misleading if almost all sales are made at the discounted price is accordingly flawed as it leaves out of account considerations that an average consumer would consider to be relevant. 

Therefore a high ratio of sales at the discount price versus the reference price is not automatically evidence that the reference price was not genuine or was unrealistic.

The outcome

Emma accepted that some of its activities had infringed the law, including where it had sold 0.08% of products at the reference price. 

The judge concluded that Emma had infringed the law but did not enforce the CMA’s 1:2 ratio of sales at reference price and discount price, he also refused to apply Emma’s proposed 1:19 ratio (so 5% at the reference price) and invited the parties to agree the terms of an enforcement order which take into account the terms of the judgment. The CMA has removed its guidance on mattress pricing, which specified the 1:2 ratio.

It’s worth flagging that the judge was cognisant of the fact that if the case had been brought under the DMCCA, and noted that breaches of an enforcement order would risk:

“a disproportionate outcome since under the DMCCA, breach of an enforcement order would expose Emma to fines calculated by reference to a percentage of its turnover as well as criminal penalties.”

The other thing to note, is that although the DMCCA still allows the CMA to seek enforcement through the courts, the CMA now has powers to take direct enforcement action and it has been doing so regarding other pricing requirements. 

Practical takeaways for retailers

From a practical perspective, things to consider are that the:

• Belief of the advertiser when setting a reference price needs to be taken into account.
• Time period a product is offered at the higher price is an important factor.
• Zero sales at the reference price will not render it misleading by default.
• But the volume of units sold is still a factor in the assessment.
• Evidence remain a necessity to substantiate claims.
• CTSI guidance, CAP articles and ASA rulings can provide useful insights to the analysis of reference pricing.