Who: The Advertising Standards Authority and Paul Godber t/a IHH
When: February 2013
Law stated as at: 25 February 2013
Recently, the Advertising Standards Authority (“ASA”) has investigated a complaint made against Iron Horse House (“IHH”) which promoted software add-ons for a train simulator game on their website www.ironhorsehouse.co.uk with the price for each product listed as a particular amount “+ VAT”.
The complaint was that VAT inclusive prices should have been quoted for compliance with the CAP Code.
What IHH had to say
IHH’s line of defence was that the price claim made on their website was not within the ASA’s remit since they are not a UK registered company and that the point of sale was in California and not in the UK.
In addition, IHH said that it was impossible for the website to be misleading since every price claim was clearly displayed and immediately qualified with text stating “+ VAT” of equal prominence to the quoted prices. Also, IHH said that approximately 30% of their sales were made to customers who did not pay VAT, and therefore if the price claim was inclusive of VAT then those consumers would be misled.
What the ASA had to say
The ASA upheld the complaint.
The ASA acknowledged that IHH was not a UK based company and prima facie their website would be outside ASA’s remit. However, the combination of the following three elements gave the ASA sufficient reason to consider that the website originated in the UK and fell within the ASA’s remit:
– the website’s URL has the top-level domain “.uk”;
– all the prices were given in GBP, and
– the e-mail addresses provided to enable consumers to contact IHH all ended “.co.uk”.
On the VAT issue, the CAP Code makes it clear that VAT exclusive prices can be given only if all customers to whom the price claim is addressed pay no VAT or can recover the cost of VAT.
Since approximately 70% of the site’s customers paid VAT on their purchases, the site should have displayed VAT-inclusive prices and therefore the price claims were misleading breaching CAP Code (Edition 12) rules 3.1 and 3.3 (Misleading advertising) and 3.18 (Prices).
Why this matters:
On the VAT question, on 20 February 2013 both CAP and BCAP have announced changes to the rules governing the use of price claims that are inclusive or exclusive of VAT. See separate report on marketinglaw.
On the jurisdiction point, this is possibly the first published report of a case in which the ASA’s online jurisdiction as regards non UK website content has been challenged. The decision offers useful pointers to when the ASA will regard itself as entitled to adjudicate.
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