Is ‘London-Stansted-Pisa £4.99 one way excluding tax’ on a website a misleading price indication? Essex trading standards thought so and they prosecuted. But did they shoot their bolt and are their ensuing calls for law reform justified?
Where: Chelmsford Crown Court
When: March 2005
A jury sitting at Chelmsford Crown Court has found Ryanair guilty of 6 breaches of the "misleading price indication" provisions of the Consumer Protection Act 1987.
The charges related to an alleged failure by Ryanair to set out the full cost of airline tickets in its internet advertising, with the cost of insurance and tax not included in the initially advertised price.
Ryanair was fined a total of £24,000 after the jury came to the conclusion that the Ryanair website had failed to clearly and immediately explain that tax would be added to the quoted price.
The true cost of the flights in question had in cases been more than double the initial price quoted. For instance a £4.99 one way flight ended up costing £11.87 after the addition of £1.88 insurance and £5 for UK air duty.
Ryanair defended on the basis that the breaches were purely "technical" and that in most cases they always ensured that the magic words "excluding tax" appeared after the price indication. In these 6 ads the words had been mistakenly left off, but Ryanair said that they had 30 million customers a year and had not had a single complaint about the advertising being misleading.
Not the end of the story
Although the jury found Ryanair guilty on these 6 counts, Judge Charles Gratwicke was clearly not of the view that Ryanair had been completely at fault. He fined the company £4,000 for each charge, but did not order the airline to pay any of the costs. This means that the £32,000 costs of bringing the prosecution will have to be met by the Council.
Probably the main reason for the Judge's failure to award the Council costs was the hard line position it had taken on all price quotations in respect of flights. It had submitted that a flight price indication was always going to be misleading unless it was quoted fully inclusive of all taxes and other additional items. It was not sufficient, it submitted, to simply add the words "excluding tax" after a price indication which turned out to be only a proportion of the price the consumer actually paid.
It was clear from the verdict that the Court did not accord with trading standards' view. Although on the six counts where the words "excluding tax" had been omitted Ryanair was clearly at fault, the court did feel that it was permissible to quote a tax exclusive price, provided a clear indication was given, alongside the price, that it excluded various identified items.
Trading standards were disappointed with the outcome and were quoted as saying that they had tested the law and the law had been found wanting. They said they were now looking to lobby the government for law reform.
Why this matters:
This certainly looks to be something of a Pyrrhic victory for Trading Standards, but would they have been better advised to charge Ryanair under any other pricing legislation?
Distance sales regulations?
What about the Consumer Protection (Distance Selling) Regulations 2000 ("DSR")? These require in an online sales context that prior to the conclusion of the contract "the price of the goods or services including all taxes" is provided to the consumer "in a clear and comprehensible manner appropriate to the means of distance communication being used, with due regard to the principles of good faith in commercial transactions".
Nothing doing for trading standards here. Apart from the probability that Ryanair do confirm the full price before the flight sale is concluded, there is also DSR 6 (2) that actually disapplies this price disclosure requirement from contracts for provision of transport services.
E commerce regulations?
How about the Electronic Commerce (EC Directive) Regulations 2002? No dice again as regulation 6 (2) only requires that references to prices shall be indicated clearly and unambiguously and, in particular, "shall indicate whether they are inclusive of tax and delivery costs." This appears to actually legitimise the "excluding tax" suffix Ryanair normally deploys.
Price marking rules?
Does the Price Marking Order 2004 ("PMO") give trading standards any help? Here perhaps we may be talking. The Order has things to say about how a "selling price" is indicated and "selling price" is defined as "the final price for a unit of a product, including VAT and all other taxes."
PMO Regulation 7 requires that an indication of a selling price shall be "unambiguous, easily identifiable and clearly legible" and "in the case of distance contracts and advertisements, given in proximity to a visual or written description of the product."
Surely this gives trading standards more ammunition? Unfortunately not. PMO Regulation 3 states that the PMO shall not apply to "products which are supplied in the course of the provision of a service," which appears to be exactly the sort of products Ryanair is supplying here.
Maybe there is a need here for a change to the consistent exclusion of service sales from the full rigour of goods price indication laws, but hang on, there could be one other regulatory issue for Ryanair.
Para 15.2 of the CAP Code of Advertising, Sales Promotion and Direct Marketing requires that "prices quoted in marketing communications addressed to the public should include VAT and other non-optional taxes and duties imposed on all buyers." Surely Ryanair's "£4.99 excluding tax" would fall foul of this?
Doh! Wrong again. The CAP Code does not apply to advertising for an advertiser's products on the advertiser's own website. Online it only applies to paid for banner advertising, email and digital promotions.
Perhaps Trading Standards' frustration is understandable but it seems Ryanair have the upper hand in this tussle, for now at any rate.