Information about the principal sources of statutory regulation governing price indications in advertising and marketing and the penalties for getting it wrong
1. The Consumer Protection Act 1987 ("CPA")
Part III is the relevant part of the CPA for these purposes
the heart of these provisions is the offence of giving a misleading price indication, while the accompanying Code of Practice for Traders on Price Indications (COPTOPI) gives practical guidance as to how to avoid committing an offence. Remember however that:-
- giving a price indication contrary to the COPTOPI does not necessarily mean an offence has been committed;
- the provisions of the CPA only apply to indications to "consumers", who are defined in the CPA as indicated below;
- the government has announced its intention to publish a revised COPTOPI "early in 2000", although section 25 of the CPA requires public consultation before publication of any version of the COPTOPI and as of 1 June 2000 this consultation had not even started.
Principal "misleading price indication" offence
The CPA (s20) provides that a person is guilty of an offence if:
"….in the course of any business of his, he gives (by any means whatever) to any consumers an indication which is misleading as to the price at which any goods, services, accommodation or facilities are available (whether generally or from particular persons)"
"Services or facilities" include credit, banking or insurance services, the purchase or sale of foreign currency, the supply of electricity, the provision of off-road parking or of caravan storage.
"Misleading" is defined in section 21 of the CAP as follows:-
For the purposes of section 20 above an indication given to any consumers is misleading as to a price if what is conveyed by the indication, or what those consumers might reasonably be expected to infer from the indication or any omission from it, includes any of the following, that is to say –
- that the price is less than in fact it is;
- that the applicability of the price does not depend on facts or circumstances on which its applicability does in fact depend;
- that the price covers matters in respect of which an additional charge is in fact made;
- that a person who in fact has no such expectation –
- expects the price to be increased or reduced (whether or not at a particular time or by a particular amount); or
- expects that price, or the price as increased or reduced, to be maintained (whether or not for a particular period): or
that the facts or circumstances by reference to which the consumers might reasonably be expected to judge the validity of any relevant comparison made or implied by the indication are not what in fact they are.
Section 21 then goes into more detail about circumstances in which price indication becomes misleading. Check the statute for the full detail.
Examples of Prosecutions under the CPA
In 1997 Toyota (GB) were prosecuted under Section 20(1) of the CPA in respect of an advertisement in the 9th June 1996 edition of the Sunday Express.
The headline of the advertisement, in letters 16mm high, read "£11,655 for a load of fresh air". In smaller print (3&4mmhigh) towards the bottom of the advertisement was the statement "the air conditioned Corolla* and Carina Solairs £11,655 and £12,999**"
In even smaller (2mm high print) at the very bottom of the advertisement were the words
"**prices correct at the time of going to press, subject to availability and includes VAT but excludes number plates, road fund licence and delivery charge of £445. Inc VAT"
The prosecution was brought by North Yorkshire County Council on the basis that the true, all-in price at which a car of the kind advertised was available was in the case of the Corolla £12,100 (ie £11,655 plus £445.) and that the indication given in the advertisement was accordingly misleading.
Toyota defended on the basis that the position in reality was that Toyota dealers only regarded the price in the advertisement as a general guide and that in 6 cases of sales of cars of the kind advertised in the advertisement between June and September 1996, Toyota dealers actually sold the vehicle for an all-inclusive price less then the £11,655 specified in the advertisement.
The Magistrates concluded however, that the advertisement conveyed the message to the ordinary consumer that the vehicle mentioned was available at £11,655 and that the qualifying statement at the foot of the advertisement was insufficiently prominent.
With regard to the evidence put forward by Toyota as to the actual price at which a number of sales of relevant cars had been effected by dealers, the Court held that this had no effect on the meaning of the indication given, even though no evidence had actually been adduced by the County Council that any of the vehicles advertised had actually been purchased for a price higher than £11,655.
In 1992 the Divisional Court heard an appeal against a refusal by the Magistrates to convict one Neil Johnson under Section 20(1) of the CPA.
The prosecution related to a sign in the window of Dixons in Stratford Upon Avon. The sign stated "We will beat any TV, hi-fi and video price by £20. On the spot". With the authority of Dixons, the store manager, Neil Johnson, put the notice outside the shop. While the notice was still on display a Mr Thomas saw a TV set available in the shop offered for sale elsewhere in Stratford Upon Avon at a price of £159.95. Mr Thomas then went to Dixons and was told that Dixons had an identical set in stock. Mr Thomas thereupon took Mr Johnson to see the set elsewhere on sale for £159.95. When Mr Thomas sought to purchase the set at Dixons for £139.95 Mr Johnson refused to sell it, apparently claiming that he was within his rights to do so.
Dixons argued that because the notice in question was not on the face of it misleading, it could not subsequently become so by a refusal to honour its terms. However, Dixons had to admit that Mr Thomas had been misled and at the end of the day he could only have been misled by the notice, which the Court regarded as a continuing offer, which whether it was misleading on its face or not, could only be tested by somebody taking it up. It became misleading when Dixons did not, in accordance with the terms of the notice, "beat any TV, hi-fi, video price by £20. On the spot."
Dixons' second line of defence was that because the prosecuted party was the manager of Dixons and Dixons was not "his business", he could not be prosecuted. Section 20(1) stated that a person shall be guilty of an offence if, "in the course of any business of his he gives (by any means whatever) to any consumers an indication which is misleading as to the price of which any good, services, accommodation or facilities are available……….."
The case went to the House of Lords on both points. On the first point, the Lords agreed with the Courts below that the notice was indeed misleading as a result of Mr Thomas's treatment at the hands of Mr Johnson.
On the second point, the Lords differed from the Divisional Court by holding that the words "of his" after "business" were there for a reason and on that basis, since the manager did not own the business in question, they allowed the appeal.
In the 1997 case of Surrey County Council versus Burton Retail Limited the Divisional Court held that where suits were being offered for sale in a part of a Burtons store which was in fact being operated by a company called Baird Menswear Brands Limited pursuant to a concession, misleading indications on garments displayed for sale were made both by Baird and by Burton, thus rendering both liable to prosecution.
In 1997 a prosecution was brought under Section 20(1) of the CPA by Stropshire Trading Standards against BSkyB. The prosecution related not to TV advertising but to leaflets which failed to make it clear that watching the forthcoming Bruno – Tyson fight on BSkyB would cost £9.95 extra as a "pay per view" deal. BSkyB admitted to the charge of providing misleading information contrary to the CPA and although they said that they tried to reduce the problem with national advertising clarifying the position, the Court fined them £5,000 and ordered them to pay £4,000 costs
N.B. The 1987 Act only applies to price indications to "consumers".
The Act defines a "consumer" as follows:-
- "in relation to any goods, means any person who might wish to be supplied with the goods for his own private use or consumption;
- in relation to any services or facilities, means any person who might wish to be provided with the services or facilities otherwise than for the purposes of any business of his; and
- in relation to any accommodation, means any person who might wish to occupy the accommodation otherwise than for the purposes of any business of his."
As with many statutes of this kind creating criminal offences, consenting, conniving or negligent senior officers or employees may be personally liable. Section 40(2) reads:-
"Where a body corporate is guilty of an offence under this Act… in respect of any or default which is shown to have been committed with the consent or connivance of, or to be attributable to any neglect on the part of, any director, manager, secretary or other similar officer of the body corporate or any person who was purporting to act in any such capacity he, as well as the body corporate, shall be guilty of that offence and shall be liable to be proceeded against and punished accordingly."
Due Diligence Defence
Section 39(1) provides that it will be a complete defence to any proceedings under this part of the CAP for the defendant to show that he took all reasonable steps and exercised all due diligence to avoid committing the offence.
If in running that defence the defendant alleges that the commission of the offence was due to the act or default of another or to reliance on information given by another, the defence cannot be relied on unless, not less than 7 clear days before the hearing of the proceedings, the defendant has served a notice identifying or assisting in the identification of the person who committed the act or default or gave the information in question.
Section 39(4) declares also:-
"That a person shall not be entitled to rely on the defence [of due diligence] … by reason of his reliance on information supplied by another unless he shows that it was reasonable in all the circumstances for him to have relied on the information, having regard in particular:-
- to the steps which he took and those which might reasonably have been taken for the purposes of verifying the information; and
- to whether he had any reason to disbelieve the information."
The defence of "due diligence" is not easy to run successfully. A defending company will have little prospect of avoiding conviction unless it can show that prior to commission of the offence, comprehensive document – supported, well-disseminated and inculcated systems were in place designed to ensure the giving of accurate price indications.
The Code of Practice for Traders on Price Indications
This was published by the Department of Trade and Industry in November 1988 in order to give guidance as to how to avoid committing an offence under the "misleading price indication" provisions of the CPA. It has not so far been amended.
The Code is split into four sections. The first deals with price comparisons, the second with the "actual price to the consumer", the third with price indications which have become misleading after they have been given and the last with the sale of new homes. Amongst the guidelines are the following:-
1.1.2 price comparisons should always state the higher price as well as the price you intend to charge for the product;
1.1.3 it should be clear what sort of price the higher price is, for example comparisons with something described by words like "regular price", "usual price" or "normal price" should say whose regular, usual or normal price it is;
1.1.4 do not use initials or abbreviations to describe the higher price in a comparison except for the initials RRP* to describe a recommended retail price or the abbreviation "MAN REC PRICE" to describe the manufacturer's recommended price. The use of RRP in respect of a wide range of "white and grown" goods is now illegal in certain circumstances – see below.
In any comparison with your own previous price;
- the previous price should be the last price at which the product was available to consumers in the previous six months;
- the product should have been available to consumers at that price for at least 28 consecutive days in the previous six months and;
* The use of RRP in respect of a wide range of "white" and "brown" goods is now illegal in certain circumstances – see below.
the previous price should have applied (as above) for that period at the same shop where the reduced price is now being offered;
1.2.3 if the previous price comparison does not meet one or more of the conditions set out above:
- the comparison should be fair and meaningful; and
- give a clear and positive explanation of the period for which and the circumstances in which the higher price applied.
1.5.1Only compare your prices with another trader's price if:
- you know that his price which you quote is accurate and up to date;
- you give the name of the other trader clearly and prominently with the price comparison;
- you identify the shop where the other trader's price applies, if that other trader is a retailer and;
- the other trader's price which you quote applies to the same products – or to substantially similar products and you state any differences clearly.
1.8.1 Do not compare your prices with an amount described only as "worth" or "value".
1.9.3 Do not [in sales or special events] use general notices saying e.g. "up to 50% off" unless the maximum reduction quoted applies to at least 10% [by quantity] of the range of products on offer.
2.26 All price indications you give to private consumers by whatever means should include VAT.
2.27 Prices may be indicated exclusive of VAT in shops where or advertisements from which most of your business is with business customers. If you also carry out business with private consumers at those shops or from those advertisements you should make clear that the prices exclude VAT and;
- display VAT inclusive prices with equal prominence; or
- display prominent statements that on top of the quoted price customers will also have to pay VAT at 17½% (or the current rate).
3.2.1 If the advertisement does not say otherwise, the price indication should apply for a reasonable period (as a general guide, at least seven days or until the next issue of the newspaper or magazine in which the advertisement was published, whichever is longer).
2. The Price Marking Order 1999
This entirely replaces the 1991 Price Marking Order and implements EC directive 98/6 on consumer protection regarding indications of the prices of products offered to consumers. The 1999 Order ("PMO") came into force fully on 18 March 2000.
Unlike the 1991 Price Marking Order, the PMO does not apply to "advertisements" as the term is defined in the PMO (although as explained below it will apply to some types of commercial communication which would generally be regarded as advertisements), or to price indications in relation to services. It applies principally to price indications on goods when displayed for sale by retailers to consumers.
The definition of "consumer" differs from that in the CPA. In the PMO it is
"any individual who buys a product for purposes that do not fall within the sphere of his commercial or professional activity".
The PMO is expressed not to apply to "advertisements", but then provides that "advertisements by means of which the trader intends to encourage a consumer to enter into a distance contract, a catalogue, a price list, a container or a label" are not "advertisements" for the purposes of the PMO.
This means, therefore that product price indications in, for example, "etail" web-sites, in catalogues and in interactive/direct response TV commercials will be governed by the PMO.
At the heart of the PMO is a requirement that price indications must be unambiguous, easily identifiable and clearly legible and placed in proximity to the products to which they relate.
When products are sold to consumers by reference to a quantity they must be marked with their price per specified unit as well as their total price. Certain products are exempted such as those sold by auction and sales of works of art and antiques. Also exempt are products supplied in the course of the provision of a service, for example shampoo used at a hairdressers, food and drink consumed in pubs or restaurants, heated and takeaway foods. Other exemptions include cases where the selling and unit price of the product are identical, and where compliance would not be useful to the consumer as it would be confusing and would not be required. This applies to advertisements (as defined in the Order) with brief exposure times and where the information may be confusing e.g. radio and television. Also exempted may be promotional offers where the price has been reduced because of the damaged condition of the product and/or the danger of its deterioration.
Other exemptions include the display of products at small shops with an internal sales area not exceeding 280sqmt.
Regarding special sales promotions, the PMO makes it clear that promotional offers should be unit-priced to reflect the single product price. This is to ensure that the consumer who does not want to take advantage of e.g. a "three for the price of two" offer, would have details of the unit price of the single item.
3. The Price Indications (Method of Payment) Regulations 1991
If a trader charges different prices accordingly to the method of payment used, for instance if credit purchasers have to pay more than cash buyers, then information about the differentiated prices and how they are calculated must be displayed.
4. The Price Indications (Re-sale of Tickets) Regulations 1994
If traders are re-selling tickets for places of entertainment including sporting events, they are required to provide information as to the price and any terms on the ticket that may affect the rights of the ticket holder, plus the location of the seat and any information about aspects that may affect the ticket holder's use and enjoyment of it.
5. The Price Indications (Bureaux de Change) Regulations 1992
These include detailed rules as to the display of charges at Bureaux de Change.
6. The Consumer Credit Act 1974 ("CCA")
There are detailed regulations regarding the content of any advertisement mentioning credit and these are covered in the "Consumer Credit" section of the "Particular Products and their Rules" paper in the course bundle. Even if these are followed, there will still be a problem if the advertisement misleads.
Section 46(1) of the Consumer Credit Act makes it an offence to convey, in a credit advertisement, information which in a material respect is false or misleading.
Where an advertisement makes reference to the availability of credit to facilitate the purchase of the product advertised, and a misleading price indication is arguably given, this is likely to give the prosecuting authorities (normally local authorities through their trading standards departments) the option of bringing proceedings under either Section 46(1) of the CCA or Section 20(1) of the CPA.
In September 1994 a prosecution was brought under Section 46(1) of the CCA against Rover Group Limited and Rover Finance Limited. The case concerned an advertisement for a Rover Metro, the price of which was stated in the headline and body copy as £5,995. In the small print at the foot of the advert was the further statement "price correct at time of going to press. "Excludes price £480.00 of 12 months road tax, number plates and delivery to dealers".
The ensuing Clwyd County Council prosecution was successful.
In his judgement, Judge Robin David said that "to state that the price of the car was £5,995) was in our judgment plainly misleading within the meaning of the Act. In truth it does seem quite obvious to the Court that the whole reason for stating the price as the advertisement did was to convey to the reader that a new Metro could be brought for under £6,000 whereas the truth of the matter is that it could not." Rover were fined £700.00 and the prosecution was awarded costs of £850.00
During the prosecution it became quite clear that this method of stating the price of a car was fairly standard throughout the motor industry. Rover appealed to the Crown Court, but the conviction was upheld and further prosecution costs of £4650.00 were awarded.
The CCA contains no definition of "consumer" but it should be noted that neither Section 46(1) of the CAA nor the 1989 Consumer Credit Advertisements Regulations will apply to advertisements indicating:-
that the credit must exceed £25,000 and that no security is required or the security is on items of property other than land, or
- that the credit is available only to a body corporate.
Car ads offering credit deals which are stated to be only for company purchases therefore escape Section 46 and the 1989 Regulations.
7. The Resale Prices Act
This effectively makes it an offence for manufacturers to seek to fix the prices at which retailers sell their products. The Act allowed the Restrictive Practices Court to exempt certain goods from the Act, but over time a number of these such as the Net Book Agreement, in relation to the retail sale of books, have been successfully challenged.
The Act also contains provisions dealing with loss leaders, effectively allowing manufacturers to withhold supplies of products to retailers if they have reasonable cause to believe that within the previous twelve months the dealer has been using its goods as loss leaders. Using goods as "loss leaders" is defined as sale not for the purpose of making a profit, but "for the purpose of attracting to the establishment at which the goods are sold customers likely to purchase other goods or otherwise for the purpose of advertising the business of the dealer". However, it will not be use as a "loss leader" to sell goods at a genuine seasonal or clearance sale, the goods not having been acquired for this purpose, or where the manufacturer has consented.
8. The Monopolies and Mergers Restrictions on Agreements and Conduct (Specified Electrical Goods) Order 1998 No. 1271
This Order applied to televisions, video recorders, hi-fi systems, cam-corders, washing machines, tumble dryers, dish washers, and cold food storage equipment.
The Order makes it illegal for suppliers of the above items to try and restrict retailers' freedom to price these products as they choose by adopting a "recommended retail price" policy. References to "RRP" or "Recommended Retail Price" in advertising for these products are therefore not permissible.
9. The Control of Misleading Advertisements Regulations 1988 as amended by the Control of Misleading Advertisements (Amendment) Regulations 2000
These can apply in two different ways to price indications in advertising. Firstly, if an advertisement, in any way, either explicitly or by implication, identifies a competitor or goods or services offered by a competitor and it contains a price comparison, then it will be illegal unless it complies with a number of requirements. The "Comparative Advertising" paper in the course bundle deals with these in detail, but amongst other rules, the advertisement must not be misleading, the goods being compared must meet the same needs or be intended for the same purpose, and there must be no discrediting or taking unfair advantage of the reputation of the competitor's trade mark.
Separately, even if the advertisement does not explicitly or by implication identify competitors, the advertisement may be caught by these regulations as a "misleading advertisement". This is defined as an advertisement which "in any way, including its presentation, deceives or is likely to deceive the persons to whom it is addressed or whom it reaches and if, by reason of its deceptive nature, it is likely to affect the economic behaviour or, for these reasons is likely to injure a competitor of the person whose interests the advertisement seeks to promote."
In all the above cases, apart from those covered by the Control of Misleading Advertisements Regulations 1988, criminal prosecutions may be brought against the company responsible and/or any director, manager, secretary, or other similar officers of the company responsible for the offence is shown to have been committed with the consent, connivance of, or to be attributable to the negligence of that individual.
On conviction by the Magistrate a fine of up to £5,000 can be the penalty or, if the case goes on indictment to the Crown Court, there is no limit on the fine.
In the case of the 1988 Control of Misleading Advertisements Regulations, the penalty in the first instance will be a decision by the ITC (TV Advertising) Radio Authority (radio advertising) or Advertising Standards Authority (print and cinema advertising) not to allow further such advertising, but if, in a print advertising context, this does not prevent the reappearance of the offending advertising, the Office of Fair Trading may as a last resort apply to the Court for an injunction preventing further dissemination of the advertising and an Order that the defendant advertiser pays costs.
No there is not. In such cases the constraints come from the civil law, for instance a misleading price indication in an advertisement could be an actionable misrepresentation or a term of the purchase contract.
A misleading or incorrect price indication in an advertisement could, in a comparative advertising context, lay the advertiser open to proceedings for trade mark infringement, libel or "malicious falsehood" (or "trade libel" as it is sometimes called). See cases referred to below.
First and foremost, there is the DTI's Code of Practice for Traders on Price Indications as already referred to. There are also the ITC Code of Advertising Standards and Practice (covering TV advertising) and the accompanying commentary contained in the Notes of Guidance of the Broadcast Advertising Clearance Centre. The BACC vets all UK advertising on behalf of the independent television networks. The other principal Code to follow in this context is the British Code of Advertising and Sales Promotion, the self regulatory code governing print, cinema and on-line advertising in the UK
There is a considerable difference between a claim to be selling at prices that are lower then those of any other competitor and a "parity" claim to be offering prices which are as low as those of any other retailer. A most useful guide available on this topic is contained in the BACC Notes of Guidance – see below. Some ITC and ASA adjudications in this area are also reported in this paper
The ITC Code of Advertising Standards and Practice does not have extensive provisions in relation to price claims.
At Paragraph 25 it states as follows:-
Advertisements indicating price, price comparisons or price reductions must comply with all relevant statutory requirements including those contained in the Consumer Protection Act 1987. Visual and verbal presentations of actual and comparative prices and cost must be accurate and incapable of misleading by omission.
- In the case of goods obtainable by instalment payments the total price of the goods must be given in the same manner as the instalment costs, and shall be afforded no less prominence then the latter. Should the frequency of instalment payments be anything other then monthly, the frequency must be indicated in the advertisement.
Paragraph 32 deals with the use of the word "free".
Advertisements must not describe goods, services or samples as "free" unless the goods, services or samples are supplied at no cost or no extra cost to the recipient other than actual postage or carriage or incidental travel undertaken by the customer in collecting the offer. No additional charge for packaging and handling may be made. A trial may be described as "free" although the customer is expected to pay the cost of returning the goods, provided that the advertisement makes clear the customers obligation to do so.
The code states in Appendix 1 entitled "Advertising and Children" the following:
except in the case of services carrying advertising directed exclusively at audiences outside the UK, advertisements for expensive toys, games and similar products must include an indication of their price.
Osborne Clarke note: as of 30th March 2000 the ITC announced an increase in the price level at which toys, games and similar products would be considered "expensive" to £25.00
- A product will not be regarded as expensive if it is reasonably widely available at a retail price below that specified by the Commission from time to time.
- Where a range of products is featured in a single advertisement, only the most expensive item need be priced.
- Where more then one item is priced, each price must clearly refer to a particular item.
- When parts, accessories, or batteries which a child might reasonably suppose to be part of a normal purchase are available only at the extra cost, this must be made clear.
- The cost must not be minimised by the use of words such as "only" and "just"
The Broadcast Advertising Clearance Centre Notes of Guidance go into greater detail in the area of price comparisons as follows:-
Price comparisons by retailers are generally acceptable, provided they are substantiated and there is no risk of consumers being misled. Offers to refund money if merchandise is found to be cheaper elsewhere can be accepted only if it is easy and straightforward for consumers to take advantage of them, e.g. where they relate to specific items. For this reason, comparisons based on variable and undefined concepts such as 'shopping baskets' are not acceptable.
Anyone intending to make a claim in this area should refer to the Code of Practice for Traders on Price Indications, published by the Department of Trade and Industry. This Code represents the official statement of good practice and in the event of an advertiser proposing to deviate from it, BACC will require a sound case to be made before the advertisement can be accepted.
Claims to offer the 'lowest prices'
This means that a retailer is able to demonstrate that his prices are lower than those of any of his competitors. He must also be able to demonstrate that he carries out an ongoing monitoring operation to ensure that they remain the lowest. For obvious reasons this claim is a very difficult one to substantiate and should in any event be backed up by a price guarantee (see below), which must be mentioned in the commercial.
Claims to offer 'unbeatable prices'
This means that a retailer can demonstrate that his prices are as low as, but not necessarily lower than, those of any of his competitors. Claims in this category are sometimes expressed as 'the lowest possible prices', 'never knowingly undersold', or 'you can't buy cheaper'. The retailer must provide evidence that he monitors his competitors' prices on an ongoing basis to ensure that his own prices remain unbeatable. Claims in this category should be supported by a price guarantee (see below), which must be mentioned in the commercial.
A price guarantee indicates that a retailer can demonstrate that his prices are either the lowest or unbeatable (see above), as the case may be, and that he also undertakes, in the unlikely event of a customer subsequently finding an item at a cheaper price elsewhere, to refund the difference (or in the case of a 'lowest prices' claim a sum greater than the difference) and simultaneously to reduce his own price for the item concerned to the appropriate level. Price guarantees are commonly subject to qualifications in respect of time, place, in stock or not, etc. and the terms of the price guarantee must be either clearly displayed at point of sale or else available in writing to the customer. (Note: offers to refund the purchase price should not be confused with, or described as, a 'price guarantee' if they are limited to a willingness to reimburse an individual customer without any accompanying reduction in the retailer's price for the item concerned).
In practice, the words 'price promise' are often used to mean much the same as 'price guarantee'.
However, the term 'price promise' would also be acceptable in referring to a simple willingness to reimburse an individual customer, where there is no claim to offer the lowest or unbeatable prices, provided the advertiser can show that his prices are generally competitive, provided he is able to support such a claim and provided the nature of the promise is clear in the commercial, e.g. 'Our price promise means that if you find any item cheaper elsewhere we'll refund the difference'. It would not be acceptable to use the term 'price guarantee' in this context, since the advertiser cannot, in fact, guarantee that his prices are either as low as, or lower than, those of his competitors.
Offers to refund money in the event of dissatisfaction
Such offers are acceptable provided the retailer is offering something in addition to the customer's rights under statute law. They are not acceptable if they indicate no more than a willingness to replace or refund the price of defective merchandise.
The BCASP contains two sections which are particularly relevant for these purposes. These are as follows:-
Any stated price should be clear and should relate to the product advertised. Advertisers should ensure that prices match products illustrated.
Prices quoted in advertisements addressed to the public should normally include VAT and other non-optional taxes and duties imposed on all buyers. In some circumstances, for example where advertisements are likely to be read mainly by businesses able to recover VAT, prices may be quoted exclusive of VAT or other taxes and duties, provided prominence is given to the amount or rate of any additional costs.
If the price of one product is dependent on the purchase of another, the extent of any commitment by consumers should be made clear.
Price claims such as "up to " and "from" should not exaggerate the availability of benefits likely to be obtained by consumers
There is no objection to making a free offer conditional on the purchase of other items. Consumers' liability for any costs should be made clear in all material featuring the offer. An offer should be described as "free" only if consumers pay no more than:
- the current public rates of postage;
- the actual cost of freight or delivery;
- the cost, including incidental expenses, of any travel involved if consumers collect the offer.
Advertisers should make no additional charges for packing and handling.
Advertisers must not attempt to recover their costs by reducing the quality or composition or by inflating the price of any product that must be purchased as a pre-condition of obtaining another product free.
In an October 1999 case involving a print advertisement by Comet, Dixons objected to two national press advertisements which claimed " The Comet price….always the lowest price….every week our staff are constantly checking thousands of competitors' prices in your area, so you don't have to. That way we know the Comet price is the lowest price advertised every day of the year. And in the unlikely event that we should miss a product we will match the price on the spot if the same product is available immediately and in a factory sealed box. That's a guarantee. Thats Comet sense".
Comet did not respond to the complaint (which did not help them), and the ASA held the advertisement misleading by guaranteeing only to "match" lower prices offered by competitors and not beat them, whereas the opening headline stated that the Comet price was the lowest price.
TV Travel Shop 1999
In the case of a TV advertisement by TV Travel Shop, the ITC dealt with the claim "We will not be beaten on price. If you can book the same holiday elsewhere for less, we will refund double the price difference."
Voice-over and on-screen text messages referred viewers to a text page for full details of the price promise.
Two viewers who had found holidays cheaper with other travel agents complained that they were told by TV Travel Shop that comparisons with those particular travel agents were not included in the offer. The viewers complained that the offer was misleading.
TV Travel Shop confirmed that the price promise only applied to comparisons with selected travel agents and only on certain tour operators' holidays. Full details of this, including the relevant tour operators and travel agents, were included on the text page that viewers were directed to. The ITC agreed that the text page fully explained the offer but did not accept that this rectified the impression given by the main commercial that the price promise applied to all holidays sold and to comparisons with all other travel agents.
The complaint was upheld.
The ASA dealt in October 1999 with a complaint by Tesco Stores Limited in respect of Asda Group advertising in a leaflet promoting the "Asda Price Guarantee". This claimed "Every month we select a customer's shopping at random and invite them to take part in our price check….the total shopping bills and the products bought will then be displayed in our entrance area for everyone to see".
Tesco who obtained a copy of the "random receipt" used to make the comparison in the advertisement believed that the advertisers had selected items that made their prices seem cheap. They challenged Asda to substantiate the claim.
The claim that its customers' shopping was randomly checked each month was a mistake, Asda explained. An agency randomly selected customers' purchases, listed the customer's goods and bought similar products from four competitors. The agency then made a full price comparison, adjusting for differences in sizes and weight for own label products, if necessary.
If an item was unavailable from any of the four competitors that item was removed from the comparison. The ASA investigated the receipts for four weeks in March and April and noted that in one week over half of the customer's original selection had been removed because of their non-availability at at least one of the four competitor's stores. There were also other inconsistencies such as comparison between peppers that were priced by weight and a competitor's individually-priced peppers. The authority considered that because the range of products considered in the final comparison could be so far removed from the range of products originally selected by the customer, the claims exaggerated the representative nature of the sampling process. The implied inaccuracy of the comparison had been undermined by inconsistencies and the ASA recommended that in future, having upheld the complaint, unless they made comparisons only with individual competitors so that they included more products and minimised the risk of bias, the advertisers should remove the claims.
The detailed "Comparative Advertising" paper in this course bundle gives more information about the principles that apply in cases of trade mark infringement or malicious falsehood in a comparative advertising context.
Clearly in relation to a comparative advertisement where a competitor's registered trade mark is mentioned, Section 10(6) of the Trade Marks Act 1994 comes into play. As the Comparative Advertising paper confirms, the Court is unlikely to find that a comparative advertisement infringes a competitor's registered trade mark unless the claimant can establish that the advertisement is "significantly misleading" to a point at which it is fair to say it is dishonest. Such arguments have been run in relation to price comparisons in advertising, but in a number of cases the trade mark infringement allegation has been effectively subsidiary to a claim couched in malicious falsehood (or trade libel).
Vodafone and Orange  FSR 34
In this case Vodafone issued proceedings for trade mark infringement and malicious falsehood in respect of Orange advertisements using the slogan "On average, Orange users save £20.00 every month." The campaign broke in late October 1995, the writ was issued on 18 November of that year and with remarkable alacrity the case reached trial on 17 June 1996, with judgement handed down by Jacob J on 10 July of that year.
Jacob J began by considering Vodafone's malicious falsehood claim which required them to establish that the slogan was false and published maliciously.
Under the law of malicious falsehood the judge is required to establish one "single natural and ordinary meaning" of the slogan in question as it would have appeared to the reasonable man. This was therefore an objective test, but Jacob J was not prepared to overlook the context in which the statement in question was made. "The public", said Jacob J "are used to the ways of advertisers and expect a certain amount of hyperbole, this is important in considering what the ordinary meaning may be. The test is whether or not a reasonable man would take the claim being made as one made seriously. The more precise the claim the more it is likely to be so taken – the more general the less so."
As for the meaning of the slogan, Orange argued that the slogan meant exactly what it said, namely that, on average, if Orange users had been on Vodafone they would have had to pay around £20.00 a month more. Vodafone contended that on the other hand there was another meaning to the slogan, namely that Vodafone users would save £20.00 per month if they switched to Orange. They said this was false because Vodafone users tended as a group to make fewer calls.
Jacob J found against Vodafone. He believed the ordinary man would have taken the advertisements as meaning that if users who are now on Orange had been on Vodafone making the same usage as they made on Orange, on arithmetic average they would have had to pay £20 more a month.
The essential aim of the campaign, the Judge found, was to convey the message that Orange's running costs were less than Vodafone's and that was precisely the message which the ordinary man would have got. He would not have read it to mean that Vodafone users would on average save £20 a month if they switched to Orange because he would not have assumed that the usage would be the same. Because Orange was on average cheaper, people would expect it to be used more.
Vodafone also attempted to undermine the Orange claims on the basis that because of differing applicable tariffs, no broad claim of the kind made by Orange in the advertising could be substantiated. Jacob J was again unimpressed. He held that the whole advertising message was about averages and that readers would clearly recognise that different tariffs were included.
Vodafone's malicious falsehood claim failed, and as a result of this it was impossible for them to establish trade mark infringement, essentially because the test to be applied was quite similar, namely the issue was whether the advertisement was significantly misleading.
BT -v- AT&T (Unreported, December 1996) (Ch.D)
In the case of British Telecommunications Plc and AT&T Communications (UK) Ltd, in which judgement was handed down by Deputy Judge Michael Crystal QC on 18 December 1996, the court dealt with an application by BT for an interim injunction in respect of AT&T advertising. Although BT said it intended to pursue a malicious falsehood claim at trial, for the purposes of the motion it relied only on its claim based on trade mark infringement.
Included in the advertising material complained of were assertions such as;
"You will get cheaper rates on your international and long distance calls from home"
"Is it cost effective to use the AT&T calling service? For practically all non local calls and especially for international calls."
"Great big savings on your international long distance calls."
"On the whole our competitive rates work out cheaper per minute than BT for long distance calls in the UK and when you use your chosen country call plans we are up to 40% cheaper on international calls".
BT argued that all of these assertions were seriously misleading. It was argued that a call-by-call comparison between the companies' respective rates for national and international calls did not demonstrate that practically all AT&T calls were in fact cheaper than those of BT and that a call-by-call comparison between BT and AT&T was in any event entirely inappropriate because of the companies' different pricing structures.
The Deputy Judge regarded it as his task to establish what the reasonable reader would understand the AT&T marketing material to be saying and in his view, taking it as a whole, it would be understood to be saying that there will be substantial savings on the bottom line of the bills that AT&T customers might hope to receive.
Adopting a robust approach, the Judge said he did not think that the reasonable reader, used to the ways of advertisers, would understand the material to be promising savings of 40% or thereabouts on international calls with AT&T (even though this was what the advertising material actually said!)
So although the evidence before the court did not support a 40% off international calls saving claim with any degree of clarity, the Deputy Judge was persuaded that the evidence before him raised an arguable case that the implicit AT&T claim of "substantial savings" was capable of being substantiated.
In the circumstances the Court did not feel the advertising material was seriously misleading and it was not therefore felt that there was a seriously arguable case of trade mark infringement. The injunction was refused.
Compaq and Dell  FSR93
The only reported UK case that the writer has been able to find in which malicious falsehood was successfully claimed in a price advertising context was the pre 1994 Trade Marks Act case of Compaq Computer Corporation -v- Dell  FSR93. In this case, claims of trade mark infringement and malicious falsehood were made, but for these purposes, since the judgement was handed down in 1991, before the Trade Marks Act 1994 and Section 10(6), we will focus on the malicious falsehood aspect of the claim.
In a series of advertisements which appeared in the UK press Dell compared its computers to allegedly similar Compaq models on the basis of price. The first Dell advertisement appeared in the UK in the Autumn of 1990 and was headed "It doesn't compute" whilst the second was headed "Spot the flaw in Compaq's logic circuits."
Another claim was:
"Dell's new 386 desktop and laptop systems are basically the same as Compaq's. Yet Compaq's prices are, quite literally, thousands of pounds higher."
It was established on the evidence that the Compaq systems featured in the Dell advertising were materially different in various essential features from the allegedly equivalent Dell products. In the case of one supposedly comparable pair of computers, for instance, there was a difference in storage capacity of 17% and a difference in access time of 30%. There was also the fact that on the claimant's evidence, average buyers would usually be able to obtain a discount of around 30% off the Compaq suggested retail price, whilst because Dell did not sell their computer systems through the retail trade, there were no general discounts given.
On the basis of the evidence before him therefore, Aldous J agreed with Compaq that the representations on price made in the advertisements were not capable of being justified.
In the circumstances, Aldous J held that there were serious questions to be tried on the issue of malicious falsehood and he therefore had to consider the balance of convenience. Having previously held that one of the issues to be taken into account when considering this question was the possibility of interference with freedom of speech (a comment foreshadowing the coming into force of the Human Rights Act in October 2000), Aldous J held nevertheless that because it was possible for Dell to alter their advertisements so as to avoid making the comparisons complained of, it was appropriate to grant an injunction. This was on condition that it was framed in such a way as to prevent the alleged injury being inflicted, while not preventing the defendants from using advertisements which made statements which they believed to be justified.
Aldous J therefore granted an injunction which effectively prohibited Dell from making certain identified statements in relation to prices and as to the essential "sameness" of the Compaq and Dell products referred to in the advertising complained of.