“Free” guidance from CAP/BCAP

Topic: Prices

Who: Committee of Advertising Practice (CAP), Broadcast Committee of Advertising Practice (BCAP)

Where: UK

When: November 2007

Law stated as at: 29 November 2007

What happened:

CAP and BCAP have issued new joint guidance on use of the word "free" in advertising and other marketing communications.  The seven-page guidance note can be found at http://www.cap.org.uk/NR/rdonlyres/F0E69FAA-AAD6-402B-A390-5001C41FF4FE/0/use_of_free.pdf.

Broadly speaking it provides that "free" can be used in any of the following situations:

• Where items are given away unconditionally to consumers (eg free samples handed out).
• Where items are made available for no payment or other consideration, apart from the cost of postage or carriage, non-premium rate telephone charges or reasonable travel to collect the item.
• Subject to complying with various conditions (see below), where an item is offered for "free" conditional on another item being purchased.
• Where a new element has recently been added to a package at no extra cost.  (But in these circumstances the additional element can only be called "free" for a reasonable time after introduction – with six months being the rule of thumb.)

"Conditional-purchase" v "package" offers

The guidance seeks to rely on a not particularly intuitive distinction between what it calls "conditional-purchase" offers and what it refers to as "package offers".  A "conditional-purchase" offer is one where item X is being offered for free to anyone purchasing item Y.  The logic of the guidance is not particularly easy to follow, but in essence the conditions for this kind of offer being described as free appear to be as follows:

(a) consumers' liability for all costs must be made clear;
(b) the quality/cost of the paid-for item must not have been adjusted so as to try to cover the cost of the free item;
(c) the free item must be "genuinely additional to" an item sold at its usual price or "genuinely separate from" the paid-for item (though note that at another point in the guidance note, the requirement is stated as being that the item must be both "genuinely separate from and additional to the item(s)…");
(d) the free item must only be supplied if the customer "complies with the terms of the promotion"; and
(e) consumers must be aware of the stand-alone price.

By contrast, where something forms part of an overall package and consumers cannot exercise genuine choice over what elements they receive for the price paid, the guidance states that it will not be permissible to refer to an element of the package as "free".

So, according to the new guidance, the following usages are likely to be permissible:

• "free wallchart when you buy Thursday's paper" (if the paper is sold without a wallchart on other days for the same price);
• "25% extra free" for a bottle of shampoo (if the bottle contains 25% more than is usually supplied at that price);
• "free travel insurance if you book your holiday online" (provided that non-internet bookings don't get free travel insurance and the cost of the holiday remains the same even if you book your insurance from a different provider);
• "buy two books and get one free" (provided that customers who choose to buy only two books and not take a third pay the same as those who take all three books);
• "free sports bag for new members" of a gym (provided that new members pay the same price regardless of whether or not they take the bag);
• "free broadband for customers of our Anytime call plan" (if broadband has recently been added as an additional feature of the package at no extra cost – but this claim would have to be dropped after say six months);
• "free internet service when you subscribe to our TV service" (if customers who choose to buy the TV service only pay the same as those who take the TV service and the separate internet service).

But the guidance states that the following would not be allowed (unless the "free" element has recently been added to an existing package at no extra charge):

• "60 free minutes per month with our Anytime call plan":  the minutes are deemed to be an intrinsic part of the package;
• "free" calls to other subscribers in the context of a package that includes a range of TV channels, access to the internet and those calls, all for a single monthly charge: again, the calls are seen as an intrinsic element of the package;
• "free binder with issue one" if consumers have no choice as to whether to take the binder.

Potential areas of uncertainty

The practical examples in the new guidance are helpful in highlighting certain circumstances where marketers can feel comfortable using the word "free".  But there are a number of apparent contradictions and problem areas in the note which may give rise to confusion.  These include the following:

1. As noted above, it is not clear whether a free item in a "conditional-purchase" offer has to be both "separate from" and "additional to" the paid-for item.   (See the third paragraph of section 3.2.1.)  Judging by the cover-mounted CD example offered at 3.2.1 in the note, these conditions should in fact be read as alternatives, rather than as a cumulative requirement.  (Cover-mounted CDs are often poly-wrapped within the newspaper/magazine package and therefore are not separate.)
2. Again in relation to "conditional-purchase" offers, the guidance states a requirement that "unless the consumer complies with the terms of the promotion" the marketer must not supply the 'free' item with the paid-for item.  However the analysis of the final example at 5.1 suggests that a "free" claim would be valid even if the "free" element were additionally supplied to people who did not comply with the terms of the promotional offer (in this case, a requirement to be a new customer).
3. Elsewhere in the guidance (eg the final bullet point in 3.2.1, at various points throughout 3.2.2 and at 5.2), there seems to be an additional requirement for "conditional-purchase" offers, namely that consumers must be able to exercise genuine choice as to whether they take the "free" item.  However, again the cover-mounted CD example (which must surely be a proper and acceptable use of the word "free") does not appear to comply with this test.  The CD is provided to every consumer who purchases the paper.
4. The availability of genuine choice appears (at 3.2.2 in the guidance) to be the deciding factor in determining whether "free" calls that are part of a package can properly be called "free".  Similarly with the example of "free internet service when you subscribe to our television service".  But don't consumers have an element of choice in relation to the free calls in that they can choose whether to make calls or not?
5. The "conditional-purchase" requirements potentially mean that "buy one get one free" (BOGOF) offers could be problematic if they coincide with a price rise.  (The guidance states that the price of the paid-for item "must not be inflated, to recover the cost of supplying the free item".)

Why this matters:

Surprisingly, this is apparently the first time that CAP and BCAP have issued joint guidance.  Given the increasing convergence of broadcast and non-broadcast media, one might perhaps expect to see more joint activity between these two bodies.

Many may still see the regulators' policy on this topic as going beyond what is necessary to avoid consumers being misled.  Granted, the word "free" has a good deal of power as an advertising claim.  But are consumers really misled by elements of a package being described as "free" rather than as "included" or "at no extra cost"?  Certainly the CAP/BCAP position still goes considerably further than the legal position under the new draft Consumer Protection from Unfair Trading Regulations 2007 (see Annex Practice 20 – "Describing a product as 'gratis', 'free', 'without charge' or similar if the consumer has to pay anything other than the unavoidable cost of responding to the commercial practice and collecting or paying for delivery of the item").  It would be interesting know what research and other evidence has driven CAP's policy on this. 

In any event, the practical upshot of the regulators' revised position is that advertisers may still need to turn to their thesauruses in situations where they might otherwise have wished to describe package elements as "free".