31 months after publication of the government’s draft revised Code of Practice for Traders on Price Indications, the final version has at last replaced the original Code, published in 1988.
Who: The Department of Trade and Industry
When: October 2005
The Consumer Protection (Code of Practice for Traders on Price Indications) Approval Order 2005 was laid before Parliament, ensuring that after 17 years, an updated version of the "Code of Practice for Traders on Price Indications" ("the Code") will finally come into force on 21 October 2005.
The first edition of the Code was published in November 1988 under the auspices of the Consumer Protection Act 1987 ("CPA"). Its purpose is to give traders guidance as to how to avoid giving "misleading price indications" and thus committing a criminal offence under the CPA. Non-compliance with the Code is not automatically an offence, but it will certainly make it difficult to avoid a conviction unless the trader can in any particular case argue convincingly that despite being at variance with the Code, the price indication is in any event not misleading.
The Code was certainly in need of an update. So much was recognised by the DTI over 2 years ago when in March 2003 it published a suggested revised Code ("Draft"), giving a deadline for the receipt of comments of 27 June 2003 and promising a new Code by the end of that year.
We reported on those proposals back in April 2003 at http://www.marketinglaw.co.uk/open.asp?A=787. So why has it taken so long to produce the final version?
The delay certainly hasn't been long enough for the DTI to get the basics right. In the Introduction it commits an embarrassing gaffe by referring to the Advertising Standards Authority as the "Advertising Standards Association"! Elsewhere however, has the final version of the Code followed through on the proposals for change in the March 2003 Draft?
The answer is that by and large the changes are pretty much as indicated over two years ago.
Shop becomes outlet
Moving the Code into the 21st Century, "shop" has been changed to "outlet" and there is a reminder that aside from the Code and the 1987 Act, there is also related legislation to be aware of such as the Price Marking Order 2004. There are also new references to price indications on websites, by e-mail or as a text message.
One new provision that was not even in the draft and reflects a recent price indications prosecution (http://www.marketinglaw.co.uk/open.asp?A=1210) states:
"A previous price used as a basis of a price comparison should be a genuine retail price. It should be a price at which you offer the goods for sale in the reasonable expectation that they could be sold by you at the higher price. In any case where a sale price is compared to a price that is higher than the usual retail price in a particular outlet, that fact should be made clear."
A new paragraph dealing with distance contracts is very much as indicated in the Draft. It states that if you sell the same products for different prices in different types of outlet (for example different prices in stores as opposed to on a website) the previous price should be the last price at which you offered the product at the outlet in relation to which the claim is made.
Again this is a brand new paragraph of the Code but it tracks pretty much word for word the proposed new paragraph of March 2003. In doing so, it emphasises that where goods are marked as discounted but they have not been sold at a higher price in the same store, the seller must display an unambiguous, easily identifiable and clearly legible general notice stating that all or a specified proportion of the goods have been bought in from elsewhere and comply with other relevant guidance in the Code.
Goods at a different state
In the section dealing with "Comparisons with prices relating to different circumstances", new wording under the heading "Goods in a different state" is very much as indicated in March 2003. This provides that prices of a collection of items should only be compared with the previous price of the same collection of the items or any difference should be explained in an unambiguous, easily identifiable and clearly legible way. For instance it is likely to be misleading if you compare the price of a complete fitted kitchen with the price of the items when sold separately if they are rarely, if ever, sold as separate items.
Comparisons with another trader's prices
As indicated in March 2003, there is a new "Lowest price" paragraph here, indicating that these must be backed up by suitable evidence to show that the trader can beat its competitors' prices. Offering a "price promise" for example to beat a competitor's cheaper price if informed of that price by a customer does not in itself justify "Lowest price" if the latter cannot be otherwise supported.
Comparisons with "recommended retail price"
Again as indicated in March 2003, new wording states quite clearly "do not use RRP or similar for goods that only you supply" and additional wording makes it clear that "if any sort of direct payment is required" (e.g. postal or delivery charges) and is not referred to in any "free offer" type price indication, this may be misleading.
Actual price to consumer
As presaged in March 2003, this section emphasises that outside the Code and the 1987 Act, there are other specific regulations on price transparency dealing with particular situations such as distance sales, package travel etc.
Pricing in different currencies
As indicated in the Draft, there is a new section here stating that there is a risk a price indication could be considered misleading if the trader offers products in both sterling and a foreign currency, but only sterling will be accepted and the sterling price is higher. In these cases the trader must make it clear that it only accepts sterling, for instance by displaying a notice to that effect.
Value added tax
Here the DTI has not followed through with a change that it suggested in March 2003. At that time it proposed to tighten the rule on quoting VAT exclusive prices.
Under the 1988 Code it had been the position that where "most" of the business being done was with business customers, VAT-exclusive prices could be quoted. The March 2003 proposal was that this should only be permissible where business was "only" done with business customers. Clearly there was some lobbying on this point as the final Code reverts to the previous position by stating that "prices may be indicated exclusive of VAT at an outlet or through advertisements from which most of your business is with business customers.
The Code goes on to make it clear that if business is also conducted at the relevant outlet or through the relevant advertisements with consumers, it must be made clear that prices exclude VAT and either the VAT-inclusive price displayed with equal prominence or a prominent statement included that the quoted prices exclude VAT, stating the appropriate rate.
Why this matters:
So by and large the final version of the new Code is very much as indicated in March 2003. It remains a mystery as to why it has taken so long to come out with the final version, but nevertheless, the limited changes are helpful in bringing the Code into the 21st Century.