The CMA loses its challenge in court against Emma Sleep relating to volume requirements in price discounting offers. When faced with robust challenge and an independent decision maker (in the form of the High Court) the CMA has lost and now has to row-back on the position taken with other businesses, including withdrawing its guidance to the mattress sector more broadly.
Background
On 30 July 2026, the High Court handed down judgment in Competition and Markets Authority v Emma Matratzen GmbH and others [2026] EWHC 1995 (Ch), a Part 8 claim brought by the Competition and Markets Authority (the “CMA”) under section 217 of the Enterprise Act 2002 against the defendants, being a group of companies including the online mattress retailer Emma Sleep (“Emma”). The CMA's investigation into Emma’s selling practices commenced in November 2022 and the parties had worked together in the intervening period to address many of the CMA’s concerns, including issues such as Emma's use of "urgency messaging" (e.g. countdown timers suggesting limited-time pricing).
The remaining issue for the High Court to consider was the CMA’s concern about Emma's use of "reference pricing" — the practice of advertising a lower price by comparison with a higher "Reference Price", such as "Was £1,000, now £500". Prior to the hearing , Emma accepted it should observe the "Duration Requirements" in the CMA’s guidance, governing how long a product must be offered at the Reference Price before a discount is advertised. The parties remained divided, however, over the CMA's proposed "Fixed Volume Requirement" (“FVR”): a rule which would require that, for every two products sold at the discounted price, one must be sold at the higher Reference Price (a 1:2 ratio), subject to certain safety valves such as a 15% margin of error and clearance-sale exceptions. The CMA was seeking an order under section 217 of the Enterprise Act 2002 which would impose the FVR rule on Emma. The case was determined under the Consumer Protection from Unfair Trading Regulations 2008 (“CPUT”), as enforced through Part 8 of the Enterprise Act 2002, since the dispute pre-dated the Digital Markets, Competition and Consumers Act 2024 (“DMCC”).
The Court's Findings
Mr Justice Richards confirmed that a "misleading action" under Regulation 5(2) of CPUT requires both a false or deceptive practice and a causative effect on a "transactional decision", assessed from the perspective of the "average consumer": someone reasonably well informed, observant and circumspect (as opposed to a reckless or hasty one). Applying that standard, the Court accepted Emma's unchallenged evidence that mattress purchases are high-value, infrequent and generally non-urgent, meaning consumers can afford to defer buying until they perceive a good deal. This dynamic explains, but does not (of itself) excuse, the sector's promotional and seasonal pricing patterns.
During the proceedings, Emma admitted specific breaches of CPUT, including advertising struck-through Reference Prices for new products which were never actually sold at those Reference Prices or used a Reference Price which was different from the price charged just before the start of the promotion. However, the Court rejected the CMA's broader case that a low proportion of sales at the Reference Price is, of itself, sufficient to establish that the reference pricing is misleading. Critically, the judge held that Emma's “subjective belief” that a Reference Price was genuinely achievable is a relevant consideration for the average consumer, even where actual sales at that price are low or zero. Drawing an analogy with Office of Fair Trading v The Officers Club Ltd [2005] EWHC 1080 (Ch), the Court reasoned that a consumer who buys at a discounted price is not necessarily misled merely because few others paid the higher price, provided the trader genuinely and realistically believed the higher price was achievable.
In its judgment, the Court gave the example of Emma offering a mattress at £1,000 for several months but no sales being made at this price as a competitor was offering a similar mattress for sale at £800. Upon realising this, Emma then discounts its mattress to £750 and markets it as “£1,000 £750” and sells 100 mattresses on the first day of the promotion. The Court noted that applying the CMA’s FVR approach, every customer who made a purchase at the reduced price would have been misled. The court rejected this, reasoning that whilst the average consumer might be sceptical, “a good number of those average consumers would have been using online research and price comparison tools before making a purchase… and so would have declined to purchase the mattress at £1,000”. Those consumers would feel their original decision to not purchase was vindicated and that they were getting a good deal at the reduced price. It was also noted that after a period, the £1,000 price would no longer be a realistic Reference Price.
The judge drew additional support for this approach from the Advertising Standards Authority’s (“ASA”) and the Chartered Trading Standards Institute’s (“CTSI”) non-binding guidance on reference pricing, both of which treat low sales volumes at a Reference Price as a relevant but non-determinative factor when determining whether reference pricing is misleading. Mr Justice Richards was careful to stress that such guidance "does not have the force of law" and "is not binding" on the Court, but held that the ASA's and CTSI's views on how an average consumer would perceive reference pricing were nonetheless "entitled to a degree of respect". He noted that his own conclusions on the relevance of a trader's genuine belief were consistent with the two-stage approach reflected in both bodies' guidance, which lent a measure of external validation to his reasoning without treating either document as legally determinative.
Applying this reasoning, the Court declined to impose the CMA's proposed 1:2 FVR. It found that the admitted breaches involved widely varying sales ratios (in one case around 1:50,000), meaning a blanket 1:2 threshold risked drawing "the line...in the wrong place" and capturing conduct that would not, in fact, mislead the average consumer. The judge was also concerned about proportionality, noting that breaching an enforcement order under the new DMCCA regime (where the underlying substantive law is broadly similar) exposes a trader to turnover-based fines and criminal penalties, and that Emma's own trial of a 1:2 ratio had reportedly coincided with a substantial fall in revenue. Rather than imposing a different fixed ratio, the Court invited the parties to agree alternative terms in light of its findings, with further submissions on alternative terms of an enforcement order to follow later in 2026 if agreement cannot be reached.
Key Takeaways for Consumer-Facing Businesses and Practitioners
The Court’s decision has not provided the legal certainty that many retailers were hoping for, and retailers will need to monitor for developments. However, the judgment does provide some key takeaways for businesses and practitioners alike.
- There are no hard and fast rules regarding sales ratios. The judgment confirms there is no fixed sales ratio (such as 1:2) that determines whether reference pricing is lawful; each case turns on the perspective of the average consumer in context.
- Genuine belief matters. Businesses should be able to evidence a genuine, and ideally objectively reasonable, belief that a Reference Price was realistically achievable at the time it was set, even if actual sales at that price were modest.
- Duration of a sale period remains key. The judgment does not disturb the accepted position that a Reference Price must have been offered for a sufficient period, and generally for at least as long as the discounted price, to be genuine.
- ASA and CTSI guidance is persuasive, but not determinative. ASA and CTSI guidance on reference pricing were treated as relevant indicators of the average consumer's perspective but were not binding, and the CMA's own sector guidance was given no evidential weight in this dispute.
- Documentary evidence carries weight in the event of enforcement. Internal pricing strategy documents and "action plan" emails were closely scrutinised, underlining the importance of consistent internal messaging around discounting practices.
More broadly, the CMA has been challenged in very few of its consumer law cases. Where challenges have taken place, the CMA has generally lost in full or in part. This is another case of businesses seeking to engage constructively with the CMA, agree compromises where appropriate, and push back where there does not appear to be any justifiable basis for the CMA’s position. It can often take a brave business to push back against the CMA, but the record shows that the CMA does not always get the law right, and businesses should therefore not be afraid to push back.
For further information on this or any consumer law issue, please do not hesitate to contact one of our specialists.
Our previous articles on the consumer law provisions of the DMCC Act can be found here, with further information on the digital markets and competition law aspects here.
