What should a quoted car price in ads include in order to ensure that it is not misleading? This question was asked in respect of ads in the Netherlands for the Kia Picanto. Willem Leppink of Rotterdam law firm Ploum Lodder Princen reports the decision of the Appeals Board of the Advertising Code Committee.
Topic: Prices
Who: Kia and the Board of Appeal of the Netherlands Advertising Code
Where: The Netherlands
When: 11 May 2012
Law stated as at: 1 July 2012
What happened:
Recently, the Dutch Advertising Regulator Board has ruled on advertising on television and on the advertiser's website for the Kia Picanto car, which was promoted for a starting price of EUR 7,995.
A Dutch consumer complained that he could not purchase the car for this price as an additional EUR 700 was charged for making the vehicle “ready to drive”.
What Kia had so say
According to Kia, in the Netherlands it is common for the car industry to advertise a vehicle using a "from £" price which includes luxury tax. However, this price does not include other inevitable additional costs to make the vehicle “ready to drive”. These additional costs can include transportation of the car to the dealer, final car cleaning and detailing, the licence plates, fuel, and an environmental levy and, Kia published these on the Kia Picanto website.
These costs were as follows:
- Costs of making the vehicle "ready to drive"* EUR 529
- Delivery package** EUR 100
- Exterior treatment EUR 195
- Fuel EUR 30
- Evironmental/ waste fee EUR 45
- Government fee for car registration EUR 38
- Government fee for title transfer EUR 9.25
* cost of making the vehicle "ready to drive" include transport of the car, cleaning and polishing, zero kilometres service check, licence plates and the KIA TOTAL WARRANTY
** Delivery package is mats, safety triangle, First aid kit, two safety vests, life-hammer and bag
What the Dutch regulator had to say
The Dutch Advertising Code Commission ("DACC") in first instance disagreed with the car manufacturer and ruled that the price information provided was unclear and incomplete. In addition, the Kia Picanto website provided the additional information only several clicks away from the main Kia Picanto page without any asterisks.
An average consumer was therefore left in a position, the DACC held, where they had incomplete price information on which to base a decision to purchase. Therefore, the DACC decided that Kia used misleading advertising to promote the Kia Picanto vehicle.
Kia appealed this decision but the Board of Appeal decided to uphold the DACC's decision.
The Board determined that both the TV ad and the web page in question qualified as an "invitation to purchase." Therefore according to the Unfair Commercial Practices Directive this invitation should include the costs that:
(1) can be determined in advance,
(2) are not avoidable and
(3) are not clear from the content of the advertisement.
The Board considered the advertising and decided that these additional costs were not provided in a clear manner. Given the fact that the costs were determined by Kia before broadcasting the advertisement, the Board said, these should have been incorporated in the advertising and since Kia failed to do so, the advertising was misleading.
Interestingly, the Board gave Kia nine months to comply with this decision to avoid putting the car manufacturer in a disadvantageous position vis-à-vis other car manufacturers, since, apparently, many Dutch car manufacturers are currently following this bad practice of not including the inevitable additional costs to make a vehicle “ready to drive” in the prices advertised on TV and websites in the Netherlands.
Why this matters:
The price of a product in most circumstances amounts to material information because it enables the consumer to take an informed transactional decision.
Failing to provide this in a timely manner before a transactional decision is made is likely to amount to a misleading omission under the Unfair Commercial Practices Directive. Therefore, advertisers and brand owners should not exclude unavoidable costs from the initial price displayed, even if their competitors are doing this.
Recently, advertising and consumer protection regulators in various EU territories seem to have turned their attention towards this issue, although there still a lot of work to be done as clearly demonstrated by this still very lenient decision e.g. giving a very lengthy grace period to Kia.
Willem Leppink
Partner
Ploum Lodder Princen, Rotterdam (NL)
w.leppink@ploum.nl
