The AA has been fined £4.2m and ordered to make payments to more than 80,000 learner drivers for not showing the full price of lessons at the time of booking, an illegal practice known as “drip pricing”.

The UK competition watchdog, which launched an investigation into the practices employed by the AA Driving School and BSM Driving School last year, said the AA-owned businesses must repay more than £760,000 as a result.

The Competition and Markets Authority (CMA) found that learner drivers were not shown the total price upfront when booking lessons online, which is required under UK consumer law. Instead, the driving schools were introducing a mandatory fee later in the process.

“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,” said Sarah Cardell, the chief executive of the CMA. “At a time when people are watching every pound, dripped fees can tip the balance. And when it comes to something as important – and costly – as learning to drive, people deserve clarity.”

The CMA said the amount repaid to individual customers would vary depending on how many lessons they bought but the average payout was expected to be about £9.

The regulator said cooperation from the AA, which admitted to breaking the law, meant it had reduced the potential financial penalty by 40%.

It is the first financial penalty the CMA has imposed for a breach of consumer law since it was granted new powers to enable it to decide whether to take action rather than having to go through the courts.

“With our new powers, it will never pay to break the law or treat consumers unfairly,” Cardell said. “Where the rules are ignored, we’ll step in to put things right.”

A spokesperson for the AA said: “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.

“Having listened to the regulator, we made immediate changes to our website to make the £3 booking fee more prominent. We are now refunding all relevant customers.

“While we are disappointed with the outcome of the investigation, we have fully cooperated with the CMA throughout and would emphasise that protecting consumer rights has been central to our business for more than 120 years.”

In November, the CMA launched investigations into eight companies, including the AA, over concerns about online pricing practices and sales tactics.

The regulator is continuing its investigations into the ticket sellers StubHub and Viagogo, the US gym chain Gold’s Gym and the retailers Wayfair, Appliances Direct and Marks Electrical.

The secondary ticketing sites are under review over mandatory additional charges applied when consumers buy tickets, and whether or not these fees are included upfront. Gold’s Gym is under investigation over not including its one-off joining fee for its annual membership in advertised membership costs.

The homeware retailers Wayfair, Appliances Direct and Marks Electrical are being investigated to determine whether their time-limited sales ended when they said they would, or whether customers were being automatically opted in to purchase additional services.

The investigations follow a cross-economy review by the CMA of more than 400 businesses in 19 sectors to assess their compliance with price transparency rules.

In 2023, the Department for Business and Trade found that almost half of online businesses (46%) used hidden or dripped fees, with consumers estimated to spend up to £3.5bn extra online each year as a result.