On 30 July 2026, the High Court handed down an important development for businesses using reference pricing. The Court rejected the Competition and Markets Authority’s (CMA) proposal to use its fixed volume rule, requiring one sale at the higher reference price for every two sales at the discounted one, to determine a consumer law breach.
However, businesses must still be able to substantiate savings claims and ensure reference prices are realistic to comply with consumer law. It's important to continue treating pricing compliance as a key issue, especially in light of the CMA’s range of recent enforcement action.
Reference pricing and background of the dispute
Reference pricing is familiar to most consumers. A product is advertised as being discounted from a higher price, with that higher price often shown as a struck-through figure, showing a saving. That can be a legitimate way of communicating value. However, there are also ways in which the presentation of the original price can be misleading.
This was the context for the CMA’s investigation into Emma, which began in November 2022. The CMA investigated Emma’s use of both urgency messaging and reference pricing. The urgency messaging issues were resolved separately, with Emma accepting certain historic infringements and agreeing not to repeat that conduct as part of a May 2026 settlement, which we discussed in our article on The Emma Mattress case. The remaining dispute concerned reference pricing, and whether the Court should impose the CMA’s proposed enforcement order based on a breach of the fixed volume requirement (FVR) referenced in the CMA’s 2024 guidance for selling mattresses online, where for each two mattresses sold at the “discounted” price, at least one must be sold at the “reference” price.
Sales volumes are not the whole story
The Court accepted that the number of sales made at the reference price is an important factor when assessing whether that price is genuine and realistic. If almost no products are sold at the higher price, that may indicate that the reference price isn't realistic and the advertised saving misleading. However, the Court refused to make the enforcement order sought by the CMA and rejected the proposed 1:2 FVR.
A key reason why the CMA did not obtain the order it sought was that the judge rejected the idea that the volume of sales at the higher price was, on its own, determinative of whether a reference price was genuine. The Court instead considered the larger context of the transaction: an average consumer would not necessarily feel misled merely because a fixed 1:2 FVR had not been met.
The judge illustrated this point with a hypothetical example: if Emma offered a mattress for sale at £1,000 for three months but a competitor undercut it by offering a similar mattress at £800, with the result that Emma made no sales at the higher price would it be misleading for Emma to reduce the price to £750 but still use the £1,000 as the reference price? On the CMA's approach, any sales of this mattress on day 1 would be a breach of the 1:2 FVR and therefore misleading. However, the Court rejected that conclusion. While consumers might initially have been sceptical about whether £1,000 was a realistic reference price, many would already have researched prices and decided not to purchase at that level. When the price later fell to £750, those consumers could reasonably have regarded themselves as obtaining a genuine bargain and viewed their decision to wait as having been vindicated, especially given the “reasonably high-cost, infrequent and generally non-urgent” nature of mattress purchases. The absence of sales at the higher price was therefore not, by itself, necessarily unrealistic.
The reasoning adopted by the Court is broadly consistent with the ASA and CTSI guidance, both of which treat sales volumes as relevant but not determinative factors.
The Court also considered Emma’s subjective belief to be relevant. If a trader genuinely believes that it can make significant sales at the higher price, that may support the argument that the reference price is realistic. The judge noted that the CMA had failed to establish that Emma lacked this genuine belief. The judge concluded that presence or absence of such a genuine belief would be a highly material consideration to the average consumer especially given that this would draw on Emma’s experience of competitive pricing pressures in the online mattress market.
It is also worth noting what the judgement didn't decide. The Court didn't say that any reference price is acceptable solely because a trader can point to some commercial rationale. Nor did it rule out the possibility that very low sales at a higher price may indicate that the higher price isn't genuine. Rather it rejected the CMA’s attempt to prescribe a 1:2 FVR of sales at either price.
Importantly, the Court has left the CMA and Emma with the opportunity to agree on the terms of an enforcement order that takes into account the conclusions of the judgement. If they are unable to agree, then this can be resolved at a further hearing later in the year. We shall wait to see the details of any order, and whether the order says anything further about sales volume.
What the CMA v Emma decision means in practice
The decision is somewhat positive news for businesses using discount pricing. Prior to this decision there had been some challenges with reconciling the CMA position on FVR as had come out the mattress investigation with the ASA approach to enforcement and Chartered Trading Standard Guidance which both treat sales as one in a number of factors to consider in promotion pricing rather than determinative. The ruling clearly endorses the idea that FVR isn't in of itself the deciding factor and suggests the ASA/Trading Standards guidance still stands. Albeit with the additional factor of the traders genuine belief.
It confirms that the CMA can't, at least on these facts, with the powers available at the time of the investigation, impose a specific and universal FVR for reference pricing. The CMA has now temporarily withdrawn its online mattress sales guidance which contained the FVR while it considers the judgement. Presumably this will also involve consideration as to whether, and to what extent, the CMA continues to reference sales ratios both in this specific guidance and more generally, and how any such evidence is used in any future enforcement action in this area.
However, the decision isn't a relaxation of the principles. A reference price still needs to not mislead as to value to the consumer and to be capable of substantiation. The higher price should be a genuine and realistic comparator, not an artificial figure used only to create the appearance of a saving. Importantly, the longer a product is advertised at the reduced price the less realistic the reference price will become. Sales ratios should also not be disregarded entirely; the greater the number of products sold at the reduced price compared to the reference price, the greater the risk that the latter may come to be considered as misleading if the trader continues to use it.
It's also worth noting that in this investigation the CMA didn't have its new powers under the DMCC. Had it had these powers the situation would have been different. The CMA wouldn't need the court to agree before going ahead with enforcement for breach of consumer law as it would have been able to fine Emma for breach and Emma would have needed to challenge the fine through the courts.
The practical message is that reference pricing should be assessed holistically. Some of the relevant factors are likely to include:
How long the product was offered at the reference price
Whether any meaningful sales were made at that price
Whether the reference price was the most recent price
Whether the trader had a genuine belief of making significant sales at that price
How long the discounted price is used for
The product and sector market context
Whether the overall presentation of the promotion creates a misleading impression
All of which should be documented before the promotion is run and retained in case of regulatory investigation.
The Mills & Reeve advertising team will continue to monitor these developments closely.
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