Gym users saved £37 million by crackdown on unfair contracts
30 Sep 2016 11:01 AM
Gym users have saved around £37 million and can switch the leisure centre they use much more easily, following work by a competition authority.
The Office of Fair Trading (OFT) urged all gyms to check their contract terms were fair and lawful under consumer protection law, after the High Court ordered Ashbourne Management Services Limited, a gym management company, not to use certain unfair terms in 2011. The case was opened by the OFT following complaints from consumers who had signed lengthy membership contracts which they could not cancel.
Following a further investigation by the OFT in 2013, 6 other gym operators agreed to give members better cancellation rights and make their contract terms easier to understand and 20 more gyms were warned to review their terms and conditions and ensure that they were fair.
The Competition and Markets Authority (CMA), which has taken on some of the OFT’s consumer enforcement powers, has now evaluated the impact of the OFT’s work and found that around 750,000 gym members have directly benefited from the intervention, and issues raised by consumers about gyms have fallen significantly since 2011.
John Kirkpatrick, CMA Senior Director responsible for the evaluation project, said:
We are pleased that the evaluation has confirmed that many gym-goers now enjoy a significantly better experience than they did before the OFT started investigating in 2011. Contracts are now usually for no longer than 12 months and they can be cancelled in circumstances such as when a member moves away from the area, loses their job or cannot use the gym because of injury.
Our evaluation has shown that the approach taken by the OFT has secured lasting change in the sector, brought benefits to consumers and can be applied to future work by the CMA. These consumer benefits were worth around £37 million over 3 years in the gyms investigated by the OFT alone, and we think there are wider benefits to gym users across the sector.
The OFT’s intervention has also been followed by innovations such as the rise of ‘pay-as-you-go’ memberships, as the £2.7 billion-a-year sector competes harder for the existing 8.75 million currently active gym members in the UK.
The CMA is committed to ensuring that contracts do not unfairly lock in consumers or prevent them from switching providers, and has worked with a number of sectors including cloud storage, wedding and event venues and higher education to improve terms and conditions.
In addition to sector-specific guidance in these areas, the CMA has also produced short and simple guides aimed at helping consumers and businesses to understand their rights and obligations under consumer law.
Notes for editors
- The CMA is the UK’s primary competition and consumer authority. It is an independent non-ministerial government department with responsibility for carrying out investigations into mergers, markets and the regulated industries and enforcing competition and consumer law. From 1 April 2014 it took over the functions of the Competition Commission and the competition and certain consumer functions of the Office of Fair Trading, as amended by the Enterprise and Regulatory Reform Act 2013. For more information see our homepage on GOV.UK.
- For CMA updates, follow us on Twitter @CMAgovuk, Flickr and LinkedIn.
- The evaluation of the OFT’s interventions into the health and fitness sector was carried out by the CMA’s internal evaluation team and reviewed by an independent academic economist, Professor Stephen Davies, Professor of Economics at the University of East Anglia and one of the 4 founders of the ESRC Centre for Competition Policy at UEA.
- The CMA estimates that the OFT intervention saved consumers around £37 million between September 2011 and June 2014. The CMA considered how gym contracts had changed following the OFT intervention and how much of that change could be attributed to the OFT. The benefits were then calculated by first estimating the number of consumers that benefited from the changes then how much each consumer would have saved over the period. By combining these figures, the CMA reached its overall estimate of the benefits of the OFT intervention. In addition, the evaluation found that the intervention had brought about other benefits, such as: changes by other gyms in the sector; the impact of changes made to contract suspension terms and the impact of more easily being able to exit contracts on increasing competition in the sector.
- Gym membership figures: The Leisure Database Company (2015), ‘2015 State of the Fitness Industry Report’.
- Annual value of UK gym sector as reported in the Mintel ‘Health and Fitness Clubs - UK - July 2015’ report.
- The Citizens Advice consumer helpline is a telephone, email and online service offering advice to consumers where they have a problem with goods and services in the UK
- The CMA has produced a range of guides for businesses and consumers including: Cancelling a contract: When and how, Subscriptions and automatic rollovers, and Excessive charges and disproportionate sanctions.
- Enquiries should be directed to Simon Belgard (email@example.com, on 020 3738 6472).