After 15 years it was certainly high time the “Code Of Practice For Traders On Price Indications” got a spring-clean.
Who: The Department of Trade and Industry
When: March 2003
The Consumer and Competition Policy Directorate of the Department of Trade and Industry published a public consultation document on proposed changes to the Code of Practice for Traders on Price Indications ("CPT").
The original CPT was published in 1988 following the coming into force of the Consumer Protection Act 1987. The 1987 statute made it an offence to give a misleading price indication and the CPT was a form of "highway code" for traders. Breach of the code was no itself an offence but could be used in court as evidence for the prosecution, whilst compliance with the code could be used as evidence for the defence.
The DTI's consultation document on an updated edition of the CPT seeks to make out a case for a review, but after 15 years hardly needs to do so. Responses to the consultation document are requested by 27 June 2003.
The changes proposed have three main aims:-
1. to bring the CPT up to date including advice on avoiding giving a misleading price indication on the internet "and other innovative selling mechanisms";
2. to clarify the guidance where new relevant legislation has been introduced since the CPT was issued in 1988 and on specific queries that have arisen; and
3. to address some "sharp practices", particularly on sales promotions.
In the proposed amendments, the introduction makes it clear that the guidance applies to all retail sales including website sales, whilst in the "Definitions" section a new item, "distance contract", has been added (defined as "any contract concerning products concluded between a trader and consumer by any means, without the simultaneous physical presence of the trader and the consumer"). The term "shop" has been changed to "outlet" so as to facilitate a broadening of the term so as to cover any means through which the distance contract might be concluded, including a website.
In the "Price comparisons" part 1, there is a new warning against abuse of the "28 day rule", which allows reductions to be claimed without the need to include an explanation of when and where the higher price applied. The new wording indicates that this should not be abused, for example, by inflating the selling price, advertising the goods at a higher price for 28 days and then claiming a reduced price for a much longer period. Other additional wording provides here that "in any case where sale prices are compared to a price that is higher than the usual retail price in a particular outlet, it must be clearly explained either that the higher price is not the usual retail price or that the goods/services were only available at the higher price for a specified period".
Where a series of reductions are made, the old requirement that all previous prices should be shown has gone in favour of wording requiring that the first and final price should be shown plus any intervening prices that are lower than the final price.
In the context of distance contracts, it is made clear that where comparisons are made with a price, this should be the last price at which the product was offered in the particular outlet where the comparison is made, and not any previous price charged in the context of a sale through a different type of outlet, for instance a high street store.
In new guidance on "Factory outlets", the new wording uses, not for the first time in the proposed changes to the CPT, the phrase "unambiguous, easily identifiable and clearly legible" which has been borrowed from the recent E Commerce regulations.
Since this is one of the few new free-standing sections we will set out the wording in full here:-
"Retailers located in factory outlet sites (i.e. sites where it is a condition of tenancy that a substantial majority of the goods must be sold at a discount) who have not sold the same goods at a higher price in the same store, may display an unambiguous, easily identifiable and clearly legible general notice stating that all (or a specified proportion) of goods have been bought in from elsewhere which may include outlets outside the UK. Specific comparisons and reductions made from particular items must comply with the other requirements of the 28 day rule or be explained and they must be verifiable in the event of a challenge by the local trading standards department or home authority.
In the section headed "Comparisons with prices relating to different circumstances" there is repetition of the "like for like" general rule in the context of the following:-
"You should only compare like with like or very similar products both in terms of quality, composition and description. If there are differences then an unambiguous, easily identifiable and clearly legible explanation of the differences should also be provided. For instance, you should avoid unfairly comparing prices of goods on special offer with those that are not, or different sizes of products since larger sizes are frequently sold at a discount."
Under "Goods in a different state" new wording relates to the price of a collection of items. This should only be compared, the revised code suggests, with the previous price of the same collection of items or any differences should be explained in an unambiguous, easily identifiable and clearly legible way. For instance, it is likely to be misleading if you compare the price of a complete fitted kitchen with the price of the items when sold separately if they are rarely, if ever, sold as separate items".
In the "Comparisons with another trader's prices" section there is an additional general requirement that "comparisons should not be unfairly biased in your own favour". Whilst it is suggested that "comparison should also be with prices of stores [should this be "outlets"?] in the same locality, unless it can be shown that it makes no difference because of a national pricing policy.
For "Lowest price" claims, other new wording indicates that these must be backed up by suitable evidence to show that the trader can beat its competitors' prices. Offering a "price promise", e.g. to beat a competitor's cheaper price if informed of that price by a customer does not of itself justify "lowest price" if the latter cannot be supported.
In the "Comparisons with recommended retail price or similar" section the new wording states quite clearly "do not use RRP or similar for goods that only you supply".
In the context of "Free offers", additional wording states "if any sort of direct payment is required (e.g. postal or delivery charges) and is not referred to in the price indication, this may be misleading".
In the "Actual price to consumer" Part 2 there is a warning that specific regulations outside the Code exist on price transparency in particular situations such as distance selling, package travel etc.
A new "Pricing in different currencies" section provides:-
"There are rules about what information must in certain circumstances be provided on exchange rates and commission charges if you accept payment in a foreign currency in addition to sterling and your local trading standards department can advise you on them. There is a risk that your price indications could be considered misleading if you offer products that are dual priced with sterling and a foreign currency but you will only accept sterling and the sterling price is higher. In these circumstances you should make it clear that you only accept sterling, for instance, by displaying a notice to that effect".
In the Value Added Tax section there is a tightening of the regime.
Whereas previously prices could be indicated exclusive of VAT in outlets where "most of" the business was being done with business customers, this has been changed to only allow such VAT-exclusive pricing where business is "only" done with business customers. Further wording underlines that "it should be noted that VAT-inclusive prices for all products offered by traders to consumers are legally required by price marking legislation".
In the "Call-out charges" section clarifying wording states: "free call-out claims should only be made when there will be no charge to the consumer unless remedial work is undertaken with their agreement".
In the "Price indications which become misleading after they have been given" Part 3, there is a new general requirement "do not give price indications which you know or intend will only apply for a limited period, without making this fact clear in the advertisement or price indication".
Why this matters:
Clearly the old code was due for an update, and in some ways it is surprising how limited the changes suggested now are bearing in mind the enormous array of potentially relevant legislation that has come into force since then. However, the changes appear timely and relevant, (although some of the section headings are still a bit clumsy) and the DTI expects to be in a position to introduce the new, revised code before the end of 2003.