Retailers and other consumer-facing business are always on the look out to promote competitive pricing and eye-catching deals to persuade consumers to part with their hard earned cash and tempt them
Retailers and other consumer-facing business are always on the look out to promote competitive pricing and eye-catching deals to persuade consumers to part with their hard earned cash and tempt them away from rival businesses.
However, consumer organisations have long been sceptical about some of the pricing practices employed, and several recent developments indicate that pricing practices are rising up the agenda at the relevant regulatory bodies in the UK, including the Advertising Standards Authority ("ASA"), Competition and Markets Authority ("CMA") and Trading Standards.
Recent ASA action
The ASA appears to be taking a harder line on the issue of pricing practices, as evidenced by a recent adjudication involving a TV ad for the electrical retailer Currys.
The Department for Business Innovation & Skills ("BIS") Pricing Practices Guide has long been used by advertisers to help demonstrate professional diligence in their pricing policies and practices. Whilst it has no statutory force, historically if a business followed its guidance then they were unlikely to fall foul of an adverse ASA adjudication. However, in this case the ASA upheld a complaint about Currys' pricing practices despite its apparent compliance with the Guide's recommendations.
The adjudication related to a Currys TV ad, seen on 27 November 2014. The voice-over of the TV ad stated "… we've got our best deals at our black tag event … LG wireless sound bar, only £159, save £90" while large on-screen text stated "£159 SAVE £90". Smaller on-screen text stated "Higher price £249 from 24/7 - 13/8/14". The complainant, who had purchased the product for £179.99 the previous week, challenged whether the savings claim was misleading.
Currys said that the claim was that the product was £90 cheaper than the £249 price, which applied from 24 July 2014 to 13 August 2014. They pointed out that the ad featured the £249 price and the relevant dates, as well as the current price of £159, and believed that a purchase at £179.99 during another period was not directly relevant to the "save £90" savings claim. Moreover, they considered that the ad fully complied with the good practices recommended in the BIS Pricing Practices Guide, and highlighted that none of the intervening prices of the product had been lower than the current price stated in the ad.
The ASA considered that the overall impression of the ad was that consumers were likely to understand that they could make a £90 saving against the usual selling price of the LG sound bar at the time the ad appeared. They noted that the "was" price was over three months old by the time the complainant saw the ad and that during the intervening period the cost of the LG sound bar had always been lower than the "was" price stated in the ad, excluding a two-day period during September 2014 when it was also £249.99. For almost half of the intervening period, including the three weeks before the price was reduced to £159, the product was £179.99, and it had also been priced at £199.99 and £229.99 for several weeks respectively. The ASA therefore concluded that the "save £90" claim was misleading as the "was" price was not a genuine representation of the price at which the product was usually sold at the time the ad appeared.
The ASA's decision certainly seems harsh in light of its approach to similar claims in other adjudications over the last few years, but as a regulatory body it has always been keen to respond to public concerns, and misleading price promotions have been attracting increasing amounts of criticism both from consumer bodies and in the mainstream press.
Note that the BIS Pricing Practices Guide is currently under review (see below).
Which? super-complaint to the CMA
In another recent development the consumer body Which? has filed a super-complaint with the CMA in relation to pricing practices in the grocery market. Which? is one of only a handful of consumer bodies permitted to submit super-complaints, which must relate to a market as a whole and not just to the conduct of a particular business, under the Enterprise Act 2002.
The super-complaint was received by the CMA on 21 April 2015 and focuses on perceived concerns about misleading and opaque pricing practices. It identifies three particular areas of concern that Which? would like the CMA to investigate: (a) confusing and misleading special offers, (b) a lack of easily comparable prices due to the way unit pricing is being done, and (c) shrinking pack sizes without any corresponding price reduction. Which? has also raised concerns about supermarket "price match" schemes and their impact on consumer decision-making.
The CMA has ninety (90) days from the date the super-complaint was received to publish its response, which must state what action (if any) it proposes to take. To assist it in assessing the super-complaint the CMA has recently been inviting comments from interested third parties.
Possible outcomes include encouraging businesses in the market to self-regulate, making recommendations to government to change legislation or public policy or taking enforcement action under existing consumer protection legislation. Perhaps the most likely outcome will be that the CMA will order a market study to look at the issues in more detail and decide on any further action that should be taken. The CMA could of course reject the super-complaint and take no further action, although this seems unlikely given that pricing practices in the grocery sector have long attracted criticism.
Review of the BIS Pricing Practices Guide
Finally, it is worth noting that, as mentioned above, the BIS Pricing Practices Guide is currently being reviewed. This follows a call for evidence by the Chartered Trading Standards Institute ("CTSI") in February 2014 on whether the Guide should be reviewed, which resulted in sixty two (62) responses, all of which suggested that changes were required. The CTSI has since held roundtable events with various stakeholders and is expected to publish a new draft Pricing Practices Guide for public consultation in the next few weeks.
What should businesses do?
In light of these developments businesses selling to UK consumers would do well to keep an eye on this area and consider reviewing their pricing practices as strategies that were previously considered acceptable or fell under the radar may be more likely to be problematic and risk the wrath of the regulators going forwards.
Both the CMA and Trading Standards have powers to issue fines in relation to misleading pricing where it breaches the Consumer Protection from Unfair Trading Regulations 2008, as Tesco found out when it was fined £300,000 for a misleading "half price" offer on strawberries in 2013. Further, it should also be borne in mind that an adverse ASA adjudication with respect to pricing practices can result in significant negative publicity for a brand.
Hopefully the CMA's response to Which?'s super-complaint and the revised Pricing Practices Guide will provide some clarity on what can be a complex aspect of advertising regulation.
However, consumer organisations have long been sceptical about some of the pricing practices employed, and several recent developments indicate that pricing practices are rising up the agenda at the relevant regulatory bodies in the UK, including the Advertising Standards Authority ("ASA"), Competition and Markets Authority ("CMA") and Trading Standards.
Recent ASA action
The ASA appears to be taking a harder line on the issue of pricing practices, as evidenced by a recent adjudication involving a TV ad for the electrical retailer Currys.
The Department for Business Innovation & Skills ("BIS") Pricing Practices Guide has long been used by advertisers to help demonstrate professional diligence in their pricing policies and practices. Whilst it has no statutory force, historically if a business followed its guidance then they were unlikely to fall foul of an adverse ASA adjudication. However, in this case the ASA upheld a complaint about Currys' pricing practices despite its apparent compliance with the Guide's recommendations.
The adjudication related to a Currys TV ad, seen on 27 November 2014. The voice-over of the TV ad stated "… we've got our best deals at our black tag event … LG wireless sound bar, only £159, save £90" while large on-screen text stated "£159 SAVE £90". Smaller on-screen text stated "Higher price £249 from 24/7 - 13/8/14". The complainant, who had purchased the product for £179.99 the previous week, challenged whether the savings claim was misleading.
Currys said that the claim was that the product was £90 cheaper than the £249 price, which applied from 24 July 2014 to 13 August 2014. They pointed out that the ad featured the £249 price and the relevant dates, as well as the current price of £159, and believed that a purchase at £179.99 during another period was not directly relevant to the "save £90" savings claim. Moreover, they considered that the ad fully complied with the good practices recommended in the BIS Pricing Practices Guide, and highlighted that none of the intervening prices of the product had been lower than the current price stated in the ad.
The ASA considered that the overall impression of the ad was that consumers were likely to understand that they could make a £90 saving against the usual selling price of the LG sound bar at the time the ad appeared. They noted that the "was" price was over three months old by the time the complainant saw the ad and that during the intervening period the cost of the LG sound bar had always been lower than the "was" price stated in the ad, excluding a two-day period during September 2014 when it was also £249.99. For almost half of the intervening period, including the three weeks before the price was reduced to £159, the product was £179.99, and it had also been priced at £199.99 and £229.99 for several weeks respectively. The ASA therefore concluded that the "save £90" claim was misleading as the "was" price was not a genuine representation of the price at which the product was usually sold at the time the ad appeared.
The ASA's decision certainly seems harsh in light of its approach to similar claims in other adjudications over the last few years, but as a regulatory body it has always been keen to respond to public concerns, and misleading price promotions have been attracting increasing amounts of criticism both from consumer bodies and in the mainstream press.
Note that the BIS Pricing Practices Guide is currently under review (see below).
Which? super-complaint to the CMA
In another recent development the consumer body Which? has filed a super-complaint with the CMA in relation to pricing practices in the grocery market. Which? is one of only a handful of consumer bodies permitted to submit super-complaints, which must relate to a market as a whole and not just to the conduct of a particular business, under the Enterprise Act 2002.
The super-complaint was received by the CMA on 21 April 2015 and focuses on perceived concerns about misleading and opaque pricing practices. It identifies three particular areas of concern that Which? would like the CMA to investigate: (a) confusing and misleading special offers, (b) a lack of easily comparable prices due to the way unit pricing is being done, and (c) shrinking pack sizes without any corresponding price reduction. Which? has also raised concerns about supermarket "price match" schemes and their impact on consumer decision-making.
The CMA has ninety (90) days from the date the super-complaint was received to publish its response, which must state what action (if any) it proposes to take. To assist it in assessing the super-complaint the CMA has recently been inviting comments from interested third parties.
Possible outcomes include encouraging businesses in the market to self-regulate, making recommendations to government to change legislation or public policy or taking enforcement action under existing consumer protection legislation. Perhaps the most likely outcome will be that the CMA will order a market study to look at the issues in more detail and decide on any further action that should be taken. The CMA could of course reject the super-complaint and take no further action, although this seems unlikely given that pricing practices in the grocery sector have long attracted criticism.
Review of the BIS Pricing Practices Guide
Finally, it is worth noting that, as mentioned above, the BIS Pricing Practices Guide is currently being reviewed. This follows a call for evidence by the Chartered Trading Standards Institute ("CTSI") in February 2014 on whether the Guide should be reviewed, which resulted in sixty two (62) responses, all of which suggested that changes were required. The CTSI has since held roundtable events with various stakeholders and is expected to publish a new draft Pricing Practices Guide for public consultation in the next few weeks.
What should businesses do?
In light of these developments businesses selling to UK consumers would do well to keep an eye on this area and consider reviewing their pricing practices as strategies that were previously considered acceptable or fell under the radar may be more likely to be problematic and risk the wrath of the regulators going forwards.
Both the CMA and Trading Standards have powers to issue fines in relation to misleading pricing where it breaches the Consumer Protection from Unfair Trading Regulations 2008, as Tesco found out when it was fined £300,000 for a misleading "half price" offer on strawberries in 2013. Further, it should also be borne in mind that an adverse ASA adjudication with respect to pricing practices can result in significant negative publicity for a brand.
Hopefully the CMA's response to Which?'s super-complaint and the revised Pricing Practices Guide will provide some clarity on what can be a complex aspect of advertising regulation.