Who: Committees of Advertising Practice
When: 21 December 2016
Law stated as at: 21 December 2016
The committee of Advertising Practice has issued new guidance on auction guide prices, the main focus of which is the inclusion of references to non-optional fees. The main points to note regarding this guidance are as follows:
- Advertising: although the ASA is likely to accept that it may not always be practical to include non-optional fees in the guide price, ads must at least provide a clear reference to the existence of those fees, and provide an explanation of how they are calculated. This information must appear immediately next to the guide price concerned.
- Calculation: where the percentage or value of non-optional fees depends on the hammer price or where fees are only applicable in certain circumstances and above a certain value, the ASA will allow for the information to appear in a separate area of the auction website or catalogue concerned. However, this approach will not be permitted for fees that can be calculated in advance – any such non-optional fees should be stated next to the auction price in question.
- VAT: non-optional fees (even when expressed as a percentage) should include VAT. However, if all or most of those to whom the claim is addressed pay no VAT or can recover it, VAT can be separated from the price (yet must still be prominently stated).
- Different non-optional fees: where different types of non-optional fees apply, the ad should differentiate between the different types and should highlight where certain fees may be applicable only to some buyers.
- Minimum fees: minimum non-optional fees should be stated in the same way as set fees.
- Practicalities: although CAP acknowledges the need to keep ads as clean as possible, it is unlikely to be acceptable to include the information on non-optional fees only in the terms and conditions. Here are some suggestions likely to be considered as acceptable:
- webpage: a ‘+ fees’ statement could be clearly marked as a hyperlink, which would take visitors to an explanatory page were relevant details are explained;
- banners on websites: websites could include a prominent statement at the top of the listing page directing consumers to an explanatory page where more information is provided about applicable fees; or
- banners on catalogues: the top, bottom or side of every listings page could have a clearly-visible statement such as “for details of what fees may apply to your listing, please look at page…”.
- Subsequent non-optional fees: CAP understands that fees disclosed just before an auction are outside the control of the advertiser. Therefore, it feels the ASA is likely to consider it acceptable:
- for auction houses dealing with lots: to include a prominent statement about the potential for such additions and to invite prospective customers to check the special conditions for individual lots before bidding;
- for online catalogues: to take all reasonable steps to regularly amend ads to include any additional fees that may be applicable.
Why this matters:
This is CAP guidance and therefore non-binding. However, as with all CAP guidance it is taken as an indication of best practice and so auction houses should take note and consider the guidance when quoting and promoting their guide prices.
Both the ASA and CAP consider a guide price an important tool for consumers as they indicate the price the consumer can expect to pay for an item at auction and allows them to estimate a budget for related costs (such as insurance).
We have already seen the ASA punishing companies for misleading advertising because of guide prices that have been considered to deceive consumers. For example, in its 2014 ruling against Auction House UK Ltd, the ASA found that where a guide price is given, a clear definition of the basis upon which that is offered (such as “the seller’s minimum price expectation” or “the currently anticipated sale price at auction”), should also be stated, and the distinction should be made between this and a reserve price that may not be disclosed and could affect the minimum sale price at auction.
The CAP and the ASA clearly need to see more transparent pricing applied to auctions. Auction houses will therefore be encouraged to follow the above guidelines in their marketing materials, both on and off-line. This could save them from complaints and subsequent investigation from the ASA.