Who: Tesco Stores Limited
Where: Birmingham Crown Court, United Kingdom
When: 19 August 2013
Law stated as at: 29 August 2013
What happened:
One customer’s complaint regarding a national strawberry price promotion in 2011 recently led to Tesco being the recipient of a hefty £300,000 fine. 400g punnets of British strawberries were marked up by Tesco as being “half price” at £1.99 with the apparent original cost of £3.99 being crossed out for customers to see. Similar price promotions were also run with the strawberry punnets being marked as half price and available with a pot of cream. The promotion was apparently a successful one for Tesco which resulted in an increase of £2.32m to their profits according to some news reports. The customer in question asked Birmingham City Council’s Trading Standards team to investigate the price promotion as she had never seen Tesco sell the strawberries for the promoted original price and therefore questioned whether the price claim was misleading.
Birmingham City Council duly took up the challenge and the matter ended up in court. The customer complaint that sparked the investigation concerned the sale of the strawberries in Tesco’s store in Sheldon but in a preliminary hearing, Birmingham City Council convinced the court the issue at hand was one of wider concern. The court was convinced that residents shopping outside of Birmingham city would also be affected by the promotion offer and therefore considered the case on a national level. The issue put before the court was that the £1.99 price offer for the strawberries ran for a period of 14 weeks but the strawberries were sold at the higher price of £3.99 for a much shorter length of time than this. Birmingham City Council argued that Tesco had sold the strawberries for just one week at £3.99 and then at £2.99 for a further one week period in 2011. The lower price of £1.99 was then promoted during the months of June, July and August 2011 using the “half price” label.
UK pricing guidelines
The BERR Pricing Practices Guide, which the CAP Code reminds marketers to take note of where price claims are concerned, sets out best practice where price comparisons and indications are concerned. A previous price used as a reference price to make a price comparison should be a “genuine” retail price. One of the indications of a genuine reference price given by the Guide is that the goods in question were offered for sale at that price for a period “at least sufficient to be a genuine offer of sale to the section of the public likely to be interested in purchasing such goods, that is, sufficient time for knowledge of the availability of the goods to be acquired by that section of the public, and sufficient time for them to view the goods, make up their minds whether to purchase them, and, if so, to complete the purchase of them.” The Guide then suggests 28 days is an indicative rule of thumb indicator. The length of sale at the new lower price should not be more than the length of time the product was available at the higher price. Birmingham City Council therefore argued Tesco’s strawberry offer was presented in a way that misled or was likely to deceive the average consumer.
The Consumer Protection from Unfair Trading Regulations 2008 (CPRs) which implement the Unfair Commercial Practices Directive also need to be borne in mind for any advertising campaign including price promotions. The CPRs prohibit traders from engaging in unfair commercial practices which harm consumers’ economic interests and the provision of information about prices is one form of commercial practice covered by such regulations. Amongst other things, a commercial practice may be misleading if it or its presentation is likely to deceive the average consumer, even if the information is factually correct. Regulation 5(4)(g) of the CPRs prohibits traders from misleading consumers about the price of a product, or the manner in which the price is calculated and regulation 5(4)(h) prohibits traders from misleading consumers as to the existence of a specific price advantage. Traders must therefore avoid giving false or misleading information, or omitting material information, about price or the manner of calculation of the price for a product, where this causes or is likely to cause the average consumer to take a transactional decision he would not otherwise have taken.
Court’s decision
As a result of the court hearing and the evidence provided by Birmingham City Council, Tesco admitted a number of offences under the CPRs. Tesco said it was not a case of “deliberate mis-selling” but an error made by an individual employee. In a statement on this case Tesco has said: “We apologise sincerely for this mistake, which was made in the summer of 2011. We sell over 40,000 products in our stores, with thousands on promotion at any one time, but even one mistake is one too many. Since then, to make sure this doesn’t happen again, we’ve given colleagues additional training and reminded them of their responsibilities to ensure we always adhere to the guidelines on pricing.”.
The judge hearing the case (Judge Michael Chambers) described Tesco’s turnover as a result of the promotions as “excessive” but agreed that while the supermarket chain had breached customers’ trust, it was not the retailer’s intention to deliberately mislead them.
He said the case was “shocking by its very nature” because consumers had a “high degree of trust” in national supermarket chains and the promotion in question was “patently wrong and misleading”. In addition to having to pay a £300,000 fine, Tesco was also instructed to pay £65,000 in costs and the judge said he had taken into account the financial damage caused to Tesco’s reputation when considering the fine.
Why this matters:
This case was considered newsworthy and of public interest by a lot of newspapers so it’s a reminder to marketers of the potential consequences that can arise if promotions are not carefully double checked – negative PR included.
Head of trading standards for Birmingham City Council Sajeela Naseer said in a statement that “Food pricing, presentation and the depiction of promotional practices is a crucial issue for retailers, and in turn, consumers.”. Retailers, and indeed any marketers, need to ensure that if they choose to make price comparisons, they should be able to substantiate and justify them and show that any claims made are accurate and valid, real and in accordance with legislation and best practice. Where the BERR Pricing Practices Guide is concerned, it can be possible for comparisons to be made on a basis which differs from the recommendations of the Guide but if this is the case then the basis of the comparison actually made should be made explicit to consumers and clearly promoted.
This case is acts as a reminder to those marketers out there who may feel that advertising claims, including price claims, are something that do not need not too much attention due to the Advertising Standards Authority not having “teeth” as they cannot award financial penalties in the event a claim cannot be properly substantiated. This is a reminder to such marketers that they should not forget the power of a disgruntled customer and the role trading standards can play where potentially misleading claims are concerned.
