Competition & Markets Authority loses consumer redress test case

England and Wales

CMS has successfully defended care home provider, Care UK, in an important consumer redress test case pursued by the Competition & Markets Authority (CMA).

The High Court judgment has wide implications for enforcement actions by the CMA and other authorities such as Local Authority Trading Standards.

The case related to Care UK’s practice of charging an “administration fee” at the point of admitting self-funded residents into care homes in England in addition to the weekly fees payable for accommodation and care services.

The CMA said that the administration fee was unfair, misleading and exploitative contrary to the Unfair Terms in Consumer Contracts Regulations 1999 (UTCCRs), Part 2 of the Consumer Rights Act 2015 (CRA) and the Consumer Protection from Unfair Trading Regulations 2008 (CPRs). The CMA sought a multi-million pound redress scheme for consumers who paid the administration fee.

The case was heard remotely over five days. In her judgment handed down on 23 July 2021, Mrs Justice Bacon dismissed all of the CMA’s claims and made important findings that will impact on future enforcement action by the CMA.


In December 2016, the CMA launched a market study into the care home sector. The CMA care homes market study report dated 30 November 2017 identified concerns regarding transparency of pricing information and the then widespread practice of care home providers charging upfront administration fees.

The CMA opened consumer protection cases in relation to a number of care home providers. Some providers settled actions and agreed to refund upfront fees that had been paid. Others, such as Care UK, defended the claims. The Care UK case was the first to come to trial.

The issues in dispute

The key issues to be decided at trial were:

  1. Whether the requirement to pay the administration fee was an “unfair term” within the meaning of Regulation 5(1) UTCCRs and Section 62 CRA.

  2. Whether Care UK’s practices in relation to how the administration fee was charged amounted to “unfair commercial practices” prohibited by Regulation 3 CPRs. This required consideration of:

    1. whether Care UK’s conduct was likely to deceive the average consumer in relation to the price or the manner in which the price was calculated (Regulation 5), or omitted information which the average consumer needed to take an informed transactional decision (Regulation 6), or was an aggressive commercial practice that was likely significantly to impair the average consumer’s freedom of choice or conduct, by exploiting a position of power (Regulation 7), and if so

    2. whether Care UK’s conduct caused or was likely to cause average consumers to take a transactional decision that they would not otherwise have taken.

The “average consumer”

The starting point in relation to consumer rights claims under this legislation is to identify the characteristics of the “average consumer”.

In law, the average consumer is “reasonably well informed, reasonably observant and circumspect”.

In undertaking the assessment of the other characteristics of the average consumer in this case, it was necessary to consider the consumers at whom Care UK’s fees and fee practices were directed. These were consumers who were making decisions about the admission of a prospective resident to a care home.

In analysing the position it was determined that the “average consumer” in this case was a family member or other representative of the prospective care home resident; and that (i) whilst decisions relating to admitting a relative to a care home would be difficult and stressful this did not impair the rationality of their decision making; and (ii) they carefully considered the selection of a care home and were able to understand the information they were given as to pricing structures and able to balance this against other factors.

The court further noted that considerable caution is necessary when considering the evidence of individual consumers. In this case, the CMA submitted witness statements from four consumers. The court found that evidence from individual consumers should not be regarded as entirely irrelevant to assessing unfair terms or unfair commercial practices. The evidence could have background or contextual information regarding the range of experiences of consumers or provide anecdotal detail of particular issues arising in more general evidence. However, the court should not rely on the evidence of a small sample of individual consumers when informing its definition of the “average consumer”.

Unfair terms

Whether a term is “unfair” depends on whether it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer and, if so, whether that imbalance is contrary to the requirement of good faith.

The CMA argued that no material separate service was being provided by Care UK in return for the administration fee and that any costs incurred at the pre-admission stage were an intrinsic part of (and therefore not severable from) the provision of accommodation and care services which were covered by the weekly fees.

However, the court found that the administration fee was not an “unfair term” as Care UK had provided material and distinct pre-admission services to prospective residents and was entitled to apply a separate charge for this. These services included activities such as a pre-admission care needs assessment, preparation of a care plan and moving in plan (amongst others). The court did note that pure marketing costs (for example, the cost of a website or other advertising activities) and the costs of handling initial enquiries including a first visit to a care home were not likely to amount to services that the average consumer would expect to pay for.

Unfair commercial practices

Three cumulative conditions are required to be satisfied in relation to the determination of whether Care UK’s approach to the administration fee amounted to “unfair commercial practices”:

  1. The practice must amount to a misleading action, a misleading omission, or an aggressive commercial practice.

  2. A subsequent decision taken by a consumer who has been exposed to the practice must be a “transactional decision”.

  3. The practice must have caused or be likely to cause the “transactional decision” to be taken (and that decision must be different to a decision that the average consumer would otherwise have taken).

The CMA alleged the following:

  • Care UK provided general pricing information on its website and via its call centre without referring to the administration fee.

  • Care UK described the administration fee as reflecting the admission costs of an individual when, in fact, the fee was not calculated on an individual basis.

  • Care UK only disclosed the administration fee after consumers were “seriously interested” and “emotionally committed” to the home.

The court rejected all of these grounds:

  • There was nothing misleading in Care UK giving guideline prices on websites and initial telephone enquiries without setting out all charges that would apply on signing up to a home. The average consumer would not have assumed the explicitly indicative price to be comprehensive, and would therefore not have gained a mistaken impression as to the price.

  • The average consumer would not think the administration fee was calculated by reference to their own individual costs of admission.

  • Care UK’s practice was generally to discuss the administration fee at the end of a first visit to a care home and the average consumer would not be emotionally committed to the home by this stage as they typically visited other homes and made repeat visits to the Care UK home before taking a final decision.

When is a “transactional decision” taken?

As the court found there had been no unfair commercial practices, it was not necessary to consider whether the commercial practices caused or were likely to cause the average consumer to take a transactional decision that they would not have otherwise taken. However, Bacon J provided some useful commentary on this issue.

In her view, on the facts of this case:

  • A decision to make an initial visit to a care home was not a “transactional decision” as it was merely gathering information to inform a subsequent decision about whether to purchase care home accommodation. The judge drew a distinction between the decision of a consumer to walk into a shop in order to buy a particular advertised product and the decision of a consumer to undertake a first visit to a care home. This was in circumstances where the evidence showed, including survey evidence from Ipsos MORI obtained by the CMA, that consumers would typically visit a care home multiple times and also visit other care homes in the locality before taking a decision to sign up with a home.

  • In contrast, a decision to arrange a pre-admission care needs assessment was directly related to the decision to enter a contract and therefore this, along with (i) the decision to enter the contract and (ii) the decision to pay the administration fee, were all “transactional decisions”.

However, on causation (if the court had to decide it), Bacon J found that the alleged commercial practices would not have had any impact on the average consumer’s transactional decisions in any event. This is because the administration fee was small in the context of the overall pricing package when looking at the duration of the typical stay in a care home and decisions regarding care homes tended to be taken on other factors such as location, ratings, facilities and the feel of the home.

High Court proceedings – CPR Part 8 or Part 7?

Another feature of these proceedings was an early dispute as to whether the claim should be brought on the CPR Part 8 or Part 7 track.

The CMA originally brought its claim under Part 8 of the civil procedure rules. This is the procedural track to be used when there is unlikely to be a substantial dispute of fact. Care UK objected to the use of the Part 8 procedure on the basis that there was likely to be a substantial dispute of fact at trial and the Part 7 process (involving disclosure and witness statements) should be used.

The CMA refused to consent to switch the claim to Part 7. As a result, Care UK made an application to court. Having considered the respective arguments, the court ordered the claim to switch to Part 7. The CMA appealed this decision but were unsuccessful.


This is a significant decision in the area of consumer redress and a setback for the CMA. Key takeaways from the case include:

  1. Whilst decided on its own facts, the judgment provides a good summary of the law in this area and some helpful wider commentary on key principles. This is a test case that will have significant impact on similar claims being pursued against other care home providers and other consumer redress claims that the CMA is contemplating pursuing more generally.

  2. The CMA is seeking permission to appeal given the implications for enforcement actions brought by the CMA and other authorities such as Local Authority Trading Standards. The CMA is likely to be particularly concerned that the court adopted a more narrow approach to determining what decisions along the sales process amount to a “transactional decision” than the broad approach advocated by the CMA and the CMA considered that less weight should be given to the defendant’s witness evidence in considering the typical circumstances of entering a contract.

  3. Practical considerations for future cases include:

    1. Careful thought will be needed by the CMA as to whether CPR Part 8 is an appropriate track to start a claim.

    2. It is unlikely to be of assistance to the court for the CMA to rely on evidence from a small number of individual consumers. Survey evidence is likely to be much more valuable.

    3. Whilst in the end nothing turned on it in this case, the court noted that evidence from a CMA director on financial records was mostly quasi-expert evidence for which no permission had been given. The CMA will need to consider whether such evidence in future cases should be given as expert evidence under CPR Part 35.

  4. The judgment comes shortly after the government announced on 20 July 2021 “an arsenal of planned reforms” to give the CMA enhanced powers via a new consultation on Reforming Competition and Consumer Policy. Businesses will be particularly concerned to ensure that the CMA is only using its powers (existing and enhanced) in appropriate cases. For further information on the new consultation please see our article here.

CMS has one of the leading practices in the UK in defending consumer protection cases. Please contact us for further information in this area.