Following its release of new suggested “principles” for price advertising in Autumn 2010, the Office of Fair Trading has identified a handful of practices that it says “have the greatest potential to cause harm.” It threatens tough action against businesses who fail to heed this warning and clean up their act as Simon Fisher reports.
Who: Office of Fair Trading
When: 2 December 2010
Law stated as at: 1 February 2011
As part of its review of price advertising practices, the Office of Fair Trading ("the OFT") has published the results of its market study into the advertising of prices. The research has helped the OFT determine how it will apply the Consumer Protection from Unfair Trading Regulations 2008 ("CPRs"), which prohibit, among other things, misleading advertising.
The study has recognised that most businesses stick to the spirit of the law in relation to pricing, but has highlighted practices, which although not always automatically unlawful, are seen as potentially the most harmful to consumers. The worst offenders are considered to be:
- "drip" pricing, where price increments such as delivery charges and taxes "drip" through the buying process;
- "baiting sales": where only a limited volume of products is available at the reduced price; and
- "time-limited offers": such as sales which finish at the end of the month or special prices which are available for one day only.
The study also look at whether consumers understood price comparison sites and found that consumers were more savvy than expected. Most consumers did in fact seem to appreciate that comparison sites do not compare all vendors, may receive a commission from vendors and that search results were based on certain assumptions and were therefore not always accurate.
The report follows a consultation, a legal discussion paper and two research papers published earlier in 2010, which are available at http://www.oft.gov.uk/OFTwork/markets-work/current/advertising-prices/.
Why this matters:
Currently the principal source of guidance in this area is the BIS (formerly BERR) "Guidance for traders on good practice in giving information about prices" first published in May 2008 and recently re-issued so traders should now welcome this additional resource.
The OFT has stated that it will be less likely to take enforcement action where a trader follows the Pricing Practice Guide produced by BIS and what it embarrassingly calls "the Advertising Standards Authority's Code on Advertising Practices" when it should have been well aware that it meant the CAP Code of Non-broadcast Advertising, Sales Promotion and Direct Marketing as administered by the Advertising Standards Authority.