Who: Tesco Stores Ltd
When: July 2014
Law stated as at: 5 September 2014
The Advertising Standards Authority (“ASA”) recently upheld a complaint from a Tesco customer who had purchased Hobgoblin beers from the retailer. Specifically, the complaints were directed at a promotion on packs of four cans of Hobgoblin beer. The promotion stated that customers who purchased the Hobgoblin beer between October 23 and November 12 2013 could make a saving of 49p per pack as the price “was £4.99, now £4.50″.
Key to the later ASA investigation were changes in the cost of the beer. Tesco stated that two months prior to the promotion, the price of the 4 pack of Hobgoblin beer was set at £4. This was the price between 1st August and 1st October 2013. After this the price rose to £4.99 for a period of 21 days between 2 October 2013 and 22 October 2013.
From 23 October to 12 November 2013, Tesco ran the promotion reducing the price from £4.99 to £4.50. After the promotion expired on 23 October 2014, the price remained at £4.50 to reflect, Tesco said, other retailers’ prices. Only on 3rd December did the price of the beer rise to £4.99, which Tesco claimed to be the normal sale price of the beer.
The complainant alleged that the promotion was misleading on two grounds:
1. The product being made available at £4.99 for 21 days before the promotion was not a reasonable amount of time in light of the two month period before this that the product had been sold at £4. Consequently £4.99 could not be seen as the “usual” price of the item. Instead there was a strong argument suggesting that £4 should be seen as the “usual” price of the item in question.
2. On the closing date of the promotion it was expected that the packs of beer would return to the “usual” price of £4.99 as suggested by the promotion. Instead the price remained at £4.50 although no promotion was in force.
The ASA agreed that the promotion could be seen as misleading on both grounds, breaching Rule 3.1 of the CAP Code. It ruled that the retailer must ensure that the prices used as the basis of savings claims accurately reflect the normal selling price for the product and do not misleadingly imply that products will revert to a higher price upon expiry of the promotion if that was not the case.
In this connection, the ASA highlighted the inclusion of an expiry date on the promotion. This implied that the price would increase to £4.99 at the end of the promotional period, but as the product stayed at the same price (despite not being no longer advertised as being on promotion), this was misleading.
Why this matters:
The supermarket industry is known for its price wars and despite the ASA acknowledging that the product category in this instance ‘was one in which prices fluctuated regularly’, the fact that the price had been lower priced for at least twice as long as it had been available at the higher price made the offer misleading.
The fact that Tesco unsuccessfully argued that they complied with the Office of Fair Trading’s (“OFT”) 2012 Guidelines on Food Pricing and Promotions by adhering to a ‘one-to-one ratio’, (i.e. they advertised the product as being on promotion for a period no longer that the period than the product had been available at the higher price) gives fair warning to retailers that following the OFT guidance in isolation when applying a promotion without consideration of the potential ability to mislead will not be sufficient.