AA Driving School Fined £4.2m for Hidden Fees, Ordered to Refund 80,000 Learners
The Competition and Markets Authority (CMA) has imposed a substantial fine of £4.2 million on the AA and directed it to issue refunds to over 80,000 learner drivers. This action stems from an investigation into illegal pricing practices, specifically drip pricing, where mandatory fees were not disclosed upfront during online bookings.
Investigation and Findings
The CMA launched its probe last year, focusing on the AA Driving School and BSM Driving School. It discovered that these businesses failed to display the total price of driving lessons at the time of booking, a clear violation of UK consumer law. Instead, a mandatory fee was added later in the checkout process, misleading customers about the true cost.
Sarah Cardell, the chief executive of the CMA, emphasised the importance of transparency, stating, "If a fee is mandatory, the law is clear: it must be included in the price from the very start – not added at checkout – so consumers always know what they need to pay." She highlighted that such practices are particularly harmful during times of financial strain, as hidden fees can significantly impact budgets for essential services like learning to drive.
Refunds and Penalties
As a result of the investigation, the AA-owned driving schools must repay more than £760,000 to affected customers. The amount refunded to each individual will vary based on the number of lessons purchased, with an average payout estimated at around £9. The CMA noted that the AA's cooperation and admission of wrongdoing led to a 40% reduction in the potential financial penalty.
This case marks the first financial penalty issued by the CMA since it gained new powers to enforce consumer law directly, without needing to go through the courts. Cardell warned, "With our new powers, it will never pay to break the law or treat consumers unfairly. Where the rules are ignored, we'll step in to put things right."
AA's Response and Broader Context
A spokesperson for the AA acknowledged the issue, saying, "Although the £3 booking fee was made clear to customers prior to their purchase, we acknowledge it should have also been displayed at the start of the online booking journey." The company has since made immediate changes to its website to enhance fee visibility and is processing refunds for all relevant customers.
This investigation is part of a wider crackdown by the CMA on deceptive online pricing. In November, the regulator initiated probes into eight companies, including the AA, over concerns about sales tactics and transparency. Ongoing investigations involve:
- Ticket sellers StubHub and Viagogo for mandatory additional charges.
- Gold's Gym for excluding joining fees from advertised membership costs.
- Retailers Wayfair, Appliances Direct, and Marks Electrical for potential misleading time-limited sales and automatic opt-ins for extra services.
These efforts follow a comprehensive review of over 400 businesses across 19 sectors to assess compliance with price transparency rules. In 2023, the Department for Business and Trade found that nearly half of online businesses used hidden or dripped fees, costing consumers up to £3.5 billion annually in extra expenses.
