Who: Advertising Standards Authority (ASA)
Where: United Kingdom
When: 30 April 2014
Law stated as at: 4 June 2014
A press ad for Debenhams described discounted fragrances as being sold at “VAT Free Prices**”. Small print clarified that the “**discount is equivalent to the VAT payable on the reduced selling price”. The ASA received a complaint that the ad would mislead the consumer into thinking that the fragrances were being sold at a discount of 20% off their original price.
Rather than being a discount of 20% on the original price, the discount was the VAT payable on the price before VAT was added to it. The discount was 20% of the lower price, amounting to a smaller percentage of the higher price. The complainant argued that a consumer seeing the ad would assume the price was being discounted by the higher amount, not the smaller discount of the VAT payable on the retail price.
The ASA disagreed, considering it to be clear to consumers that the products were being sold at their pre-VAT prices. As the original price was inclusive of VAT, the discount had been calculated by removing the VAT, rather than by subtracting 20% from the original price. The ASA did note that the small print could have been clearer on how the discount was calculated, but nevertheless concluded the ad was unlikely to mislead consumers.
The ASA investigated the ad under CAP Code rule 3.1 (Misleading advertising) and 3.9 (Qualification) but found it not to breach these.
Why this matters:
According to the ASA, Debenhams’s marketing of their products as VAT free was not in itself a problem. The discount had been calculated in the manner in which the “VAT Free Prices” claim suggested. However, the ASA did criticise the fact that the small text, whilst not contradicting the claim, did not fully clarify the situation. This is an important take away point for advertisers making claims that may be perceived as less straightforward than the one in this case; the small print must clarify and set out the detail of any deals or promotions in ads, to avoid the risk of being found misleading.
The full report can be found at this link.